PPG Hints It May Walk Away From $29.5 Billion Bid for Akzo Nobel

  • U.S. paintmaker weighs ‘whether or not’ to pursue takeover
  • Dutch rival rejects proposals, defying shareholder pressure

PPG Industries Inc. is considering whether to drop its pursuit of paintmaking rival Akzo Nobel NV, suggesting for the first time that it may end a takeover push after the Dutch maker of chemicals and coatings refused to discuss a sweetened offer of $29.5 billion.

The U.S. paintmaker remains convinced that its proposal is “vastly superior” to Akzo Nobel’s alternative plan of splitting into two companies, Pittsburgh-based PPG said in a statement Wednesday. An offer for the executives at the rivals to meet remains on the table.

“Without productive engagement, PPG will assess and decide whether or not to pursue an offer for Akzo Nobel,” according to the statement.

Akzo Nobel on Monday rejected PPG’s third takeover bid, defying pressure from shareholders such as Elliott Management Corp. to negotiate. PPG Chief Executive Officer Michael McGarry, who is also chairman, flew to Rotterdam over the weekend with lead director Hugh Grant in an attempt to jump-start talks. They found Akzo Nobel CEO Ton Buechner and Chairman Antony Burgmans unwilling to negotiate during a 90-minute airport meeting.

“The remaining questions raised by Akzo Nobel are common negotiation points and can be quickly and reasonably resolved through an open, substantive two-way dialogue,” McGarry said in the statement. “Akzo Nobel, however, has chosen not to engage in meaningful discussions and has refused our invitation for a meeting of our respective antitrust counsels.”

Tough Region

PPG faces a difficult environment for hostile takeover in Western Europe, and the Netherlands in particular. Since the start of 2000, only about 16 percent of hostile takeovers in the country have been completed, according to data compiled by Bloomberg.

The Dutch company wants to be left alone to carry out its strategy to break into two companies focused on chemicals and coatings. Without Akzo Nobel’s engagement, McGarry may walk away or make a hostile offer by a June 1 deadline.

“PPG could go direct to shareholders but the vote and regulatory approvals would be uncertain,” Jeremy Redenius, an analyst at Sanford C. Bernstein, said in a note Wednesday. He downgraded Akzo Nobel shares to the equivalent of hold, from buy, and reduced the target price to 82 euros from 84 euros.

PPG was little changed at $107.73 at 12:41 p.m. in New York. Akzo Nobel fell 1.6 percent to close at 75.77 euros in Amsterdam, the lowest since March 20. The decline values Akzo at 19.1 billion euros ($20.8 billion).

Elliott, billionaire Paul Singer’s New York hedge fund, petitioned a Dutch court on Wednesday to back its request for a shareholders’ vote on firing Burgmans, claiming he is in "flagrant breach" of his duties to investors for rejecting PPG’s offers. Akzo reiterated its support for the chairman, saying he has played a crucial role in evaluating and rebuffing the latest bid.

Akzo Nobel cited “risks and uncertainties inherent in PPG’s proposal” for rejecting the shareholder offer, concluding its own strategy offers a “superior route to growth and long-term value creation.”

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