Deals

Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

(Corrected )

It's usually easier for bidders to win over a target's shareholders than it is to seduce staff and politicians. When predators meet resistance, they need to find ways of overcoming opposition. PPG Industries Inc., which is struggling to get a hearing with Akzo Nobel NV, should turn on the charm.

PPG boss Michael McGarry has been in the Netherlands making the case for his proposed jumbo chemicals deal. Akzo shareholders like the idea and just want a higher price. Everyone else -- management, unions and politicans -- is digging in. That's a problem for PPG. A hostile deal would be risky and, even if it succeeded, the company would lack a mandate from the society in which it operates.

Introductions matter in M&A. The PPG bid attempt got off to a bad start. The timing of its first approach, weeks before the Dutch elections, provoked a political backlash. The manner was unwise too: McGarry met Akzo counterpart Ton Buechner for an apparently informal lunch. Then he handed over a letter detailing his takeover plans. That's the confrontational style of an angry litigant.

Can PPG redeem itself? Raising the price shouldn't be a problem. The U.S. company says the current proposal would boost its per-share earnings from the get-go. PPG's shares have outperformed in recent weeks, suggesting its investors may back it paying more.

Egging On
PPG's shares have outperformed since its interest in emerged
Source: Bloomberg

Now to the rest. PPG says a "substantial portion" of savings would come from buying-power and bringing supply chains together. If the assessment is correct, that may allow it to offer assurances on Dutch jobs -- especially given that Akzo has itself cut 4,610 roles since 2012.

That won't be enough to assuage local concern, though. It's hard to see the logic of moving the headquarters out of the U.S. But there is room to budge on the other common bargaining chips in M&A: combined company name, listing structure and governance.

A new corporate name that preserves the heritage of both companies would make sense. PPG stands for Pittsburgh Plate Glass, three words that hardly describe a business that's now global and dominated by paints and coatings. A moniker nodding to Akzo's heritage would send a strong message. After all, Kraft Heinz Co was reportedly willing to take on the Unilever name in its bid for the Anglo-Dutch consumer goods maker.

A joint listing that preserved Dutch share trading would foster the sense that a deal was the creation of a global company rather than a takeover by the Americans. As for governance, PPG could offer more than just one seat on its current 10-strong board.

None of these measures would cost PPG much. But they might just repair some of the damage done from that ham-fisted opening.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(A previous version of this story said Michael McGarry and Ton Buechner met for coffee rather than lunch.)

To contact the author of this story:
Chris Hughes in London at chughes89@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net