Akzo's Court Win Against Elliott Shifts Focus to PPG's Next Move

  • Dutch judge rejects shareholder bid to oust Akzo chairman
  • PPG renews calls for talks with Akzo in takeover battle

Akzo Nobel NV’s court victory against activist shareholder Elliott Management Corp. has strengthened the Dutch paintmaker’s hand in resisting a takeover approach from suitor PPG Industries Inc. and put pressure on the U.S. rival to take its offer directly to investors.

The Commercial Court of the Netherlands ruled late Monday that Akzo Nobel is under no obligation to honor demands from shareholders led by the New York-based fund for a vote on removing Chairman Antony Burgmans, seen as an obstacle to negotiations. Judge Gijs Makkink said the company didn’t have to involve investors in decisions regarding the unwanted bids from PPG and was within its rights to reject talks.

Ton Buechner, left, and Antony Burgmans

Photographer: Jasper Juinen/Bloomberg

“The ruling has reduced the likelihood of a combination with PPG, leaving only a hostile bid as the way going forward,” said ING Bank analyst Stijn Demeester, adding that Akzo Nobel’s anti-takeover defense mechanism would result in “significant risk” for PPG.

Akzo Nobel shares fell 1.7 percent to 75.05 euros at 10:31 a.m. in Amsterdam, giving the company a market value of 19 billion euros ($21 billion).

“PPG remains willing to meet with Akzo Nobel regarding a potential combination of the two companies, but without productive engagement, PPG will assess and decide whether or not to pursue an offer for Akzo Nobel,” the U.S. company said in a statement after the ruling.


Elliott had petitioned the Amsterdam court to intervene in the nearly three-month-old takeover battle, alleging Burgmans, 70, failed in his duties to investors in refusing meaningful talks and rebuffing three takeover offers by PPG, the latest worth about $29.5 billion. The fund controlled by billionaire Paul Singer had asked the judge to force Akzo Nobel to allow a vote on Burgmans, a request that garnered support from other shareholders and exposed investor disgruntlement with the Dutch company’s position.

In his ruling, Makkink said that while he didn’t doubt Akzo Nobel’s management, it and the company’s board should find a way to normalize relations with shareholders and be more accountable to them on why PPG’s offers were rejected. Elliott could appeal Makkink’s verdict to the Supreme Court.

Akzo Nobel spokesman Leslie McGibbon said the company was “very pleased with the result of the court ruling,” while Elliott said it was “surprised and disappointed” and is considering the implications. 

“It remains to be seen what PPG will do,” said KBC Securities analyst Wim Hoste. “A hostile offer is obviously a bit more complicated as it would anyhow take quite some time to close a transaction given the obligatory antitrust reviews.”


The case, which was heard in court on May 22, opened a legal front in PPG’s attempted takeover. The Pittsburgh-based company faces a June 1 deadline -- which it is contesting -- to submit an offer document to the Dutch market regulator. If and when the document is approved, PPG Chief Executive Officer Michael McGarry would have six working days to take the offer directly to shareholders or walk away for six months.

The highly-charged hearing brought together executives and lawyers from all sides, including Burgmans and McGarry. The U.S. CEO condemned Akzo Nobel’s refusal to engage in talks “against the wishes of its shareholders” and asked the judge to help bring the Dutch company to the negotiating table.

“The era of elitism and ‘the board knows best’ is over,” McGarry said. “The shareholder needs to be heard.”

Elliott’s lawyer spoke about a “crisis of confidence” among Akzo Nobel shareholders, while Burgmans told the court Akzo Nobel’s board had made a “rational consideration” of PPG’s latest offer. For its part, Akzo Nobel said the chairman had the backing of all supervisory board members and that even the dismissal of Burgmans “would not achieve the effect sought by Elliott.”

The Dutch paint and coatings maker has said PPG’s offers undervalue the company and wouldn’t be in the best interest of all stakeholders. CEO Ton Buechner on April 19 put forward an alternative plan of returning 1.6 billion euros to shareholders and spinning off the chemicals unit within 12 months.

Elliott also asked the court to order an inquiry into Akzo Nobel’s management policies. Any probe could take more than six months and if the court found evidence of mismanagement, executives could be dismissed.

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