PPG Industries Said to Explore Possible Deal With Akzo Nobel

Updated on
  • PPG said to be interested in all or part of Dutch paintmaker
  • Transaction would create global leader in specialty chemicals

Akzo Nobel Rejects $22.1B Takeover Bid From PPG

PPG Industries Inc., the world’s largest coatings company, is exploring a potential deal with Dutch rival Akzo Nobel NV, according to people familiar with the matter.

PPG is working with advisers to study a transaction that could involve acquiring all or part of Amsterdam-based Akzo, the second-biggest paint maker with a market value of about $17 billion, the people said, asking not to be identified as the details aren’t public. There is no certainty an agreement will be reached, they said.

Spokesmen for Akzo and PPG declined to comment.

A deal between Pittsburgh-based PPG, with a market valuation of about $25.9 billion, and Akzo would create a global leader in specialty chemicals. Akzo is Europe’s largest coatings supplier and the world’s largest producer of protective and marine coatings. Its portfolio spans basic chemicals such as chlorine all the way through to ingredients for skin cream and paint for Formula 1 racing cars.

PPG shares closed up 6 percent at $106.83 in New York, while Akzo Nobel’s U.S. traded shares climbed 13 percent.

PPG, which has 156 factories worldwide supplying paints, specialty materials and fiber glass, is the world’s biggest producer of coatings for autos and aerospace and No. 2 in architectural and packaging markets, according to a company presentation. It acquired Akzo’s North American architectural paint business in 2012 for $1.05 billion.

Antitrust Scrutiny

Many PPG investors see the company’s relatively low leverage as an opportunity to make acquisitions, Mike Harrison, a Chicago-based analyst at Seaport Global Holdings LLC, wrote in a note to clients. Harrison recommends buying the shares. A deal is likely to be heavily scrutinized by U.S. and European Union antitrust authorities, he wrote Wednesday.

PPG’s net debt is roughly equal to its earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. A cash purchase of Akzo would boost net debt to about 4.3 times Ebitda, excluding any cost savings, Harrison said in the note.

A friendly deal may be PPG’s best bet as Akzo has in place a Dutch stichting, or foundation, which owns priority shares and can be used as a safeguard against a hostile takeover.

Dutch politicians have become increasingly vocal about safeguarding companies against takeovers. In the wake of Kraft Heinz Co.’s approach to Unilever, Dutch Finance Minister Jeroen Dijsselbloem told radio station TROS Kamerbreed the Anglo-Dutch company should adopt measures allowed in the Netherlands to protect against hostile takeovers. Unilever rejected the $143 billion offer and Kraft-Heinz withdrew its proposal last month.

Chemical Consolidation

Both Akzo Nobel and PPG have stayed on the sidelines of recent dealmaking in the paint and chemicals industries. Sherwin-Williams Co. has agreed to pay $11 billion to buy rival paintmaker Valspar Corp. in a deal that would catapult the company past industry leaders PPG and Akzo Nobel.

Dow Chemical Co. agreed in 2015 to a $65 billion planned merger with DuPont Co., while Evonik Industries AG agreed to the $3.8 billion purchase of a coatings additives business from Air Products & Chemicals Inc.

— With assistance by Jack Kaskey, Andrew Marc Noel, and Aaron Kirchfeld

(Updates with analyst’s comment starting in seventh paragraph.)
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