Akzo, Elliott Call Truce as New CEO Wins More Time for SplitBy
Elliott to suspend all litigation for at least three months
Activist, large shareholders to have a say in board member
Akzo Nobel NV and activist investor Elliott Management agreed to end their legal skirmishes that had dragged the two parties into acrimonious confrontations, giving new Chief Executive Officer Thierry Vanlancker some breathing space to proceed with a planned split of the Dutch paint-and-chemicals maker.
Elliott, one of Akzo’s biggest shareholders with a 9.5 percent stake, agreed to back the signing-in of Vanlancker as CEO on Sept. 8 and also supports a plan to dispose of a chemicals division, the Amsterdam-based company said in a statement on Wednesday. In a concession to shareholders upset by Akzo’s steadfast refusal to explore a tie-up with PPG Industries Inc., investors will have a say in the nomination of a supervisory board member.
Vanlancker now has a clear run at selling or spinning off the 10 billion-euro ($11.7 billion) division to prove Akzo Nobel’s strategy is superior to PPG’s rejected $29 billion proposal. The agreement comes as Paul Singer’s Elliott fund last week lost a second lawsuit aimed at removing Chairman Antony Burgmans for his part in rebuffing PPG.
The standstill agreement means Elliott avoids a potentially fruitless trip to Amsterdam’s Enterprise Chamber on Sept. 20, as that same court ruled in favor of Akzo’s management at a previous day-long hearing. Having acquired shares in Akzo in December and built a holding worth almost 2 billion euros, the hedge fund still stands to benefit from any gain from a chemicals transaction, scheduled to take place by April.
“Elliott suffered some setbacks but, as an activist investor, it will obviously continue to put pressure on Akzo Nobel,” Theodoor Gilissen analyst Joost van Beek said by phone. “The gap between the price PPG was willing to pay and what Akzo is worth now remains a bottleneck for shareholders.”
Elliott became a shareholder prior to PPG coming on the scene, in a bet that Akzo was ripe for a breakup. It then changed tack, and led a campaign for talks with PPG, mounting a series of court cases to have Burgmans removed. The New York-based fund is known for using lawsuits and media to force change at companies.
After months of talks, namely on the issue of a full separation of the speciality chemicals business as opposed to a partial IPO or split, Elliott and Akzo became much more aligned, according to a person familiar with the matter. The addition of two new independent directors has given Elliott more confidence in the company’s corporate governance by bringing oversight and expertise, said the person, who asked not to be identified because the matter is private.
If there is another M&A opportunity that presents itself, a strengthened board will be a positive in future discussions, the person said. Elliott also believes there were some reasons to cheer in the judge’s decision, namely that it recognized the right for shareholders to call a meeting but thought that it was premature because of the already planned Sept. 8 get together, the person said.
With the Elliott cease-fire agreed and PPG blocked by Dutch takeover rules from coming back with another offer until December, Akzo is keen to restore relations with shareholders. Once the separation of chemicals is done, the maker of Dulux paint may need support if it’s slimmed down structure attracts PPG or other buyers, analysts have said. A PPG spokesman reiterated earlier comments that the U.S. company has moved on from its pursuit of Akzo.
Akzo Nobel shares climbed 1 percent to 77.40 euros as of 4:30 p.m. in Amsterdam. The Dutch company shares are the best performer in Amsterdam’s benchmark index, with a gain of about 30 percent so far this year.