Elliott Steps Up Pressure as Akzo Spurns New PPG Bid -- 3rd Update
March 22 2017 - 9:11AM
Dow Jones News
By Ben Dummett and Ian Walker
LONDON--Elliott Management Corp., the big U.S. activist
investor, on Wednesday threatened to use obscure Dutch corporate
rules to force paint and chemicals giant Akzo Nobel NV to consider
a sweetened EUR22.37 billion ($24.19 billion) bid from American
rival PPG Industries Inc.
The Amsterdam-based company said PPG's revised offer worth
EUR88.72 a share, which comes just weeks after its initial
EUR83-a-share offer was rebuffed, undervalues the company and
doesn't warrant engaging with its U.S. suitor.
Elliott, which owns a 3% stake in Akzo, on Wednesday agreed that
the new offer was too low, but the hedge fund stepped up pressure
on Akzo to talk with PPG. Elliott said it might use Akzo's
corporate bylaws to force a special shareholder meeting to address
the PPG approach.
The unusual move comes as some analysts have said Akzo's Dutch
corporate rules protect it--not make it more vulnerable.
In a call with reporters, Akzo Chief Executive Ton Büchner
wouldn't say whether he had spoken with Elliott about the latest
approach but confirmed that he spoke with the fund after the
initial offer.
Akzo shares were down 2.7% to EUR74.51 in midday Amsterdam
trading, suggesting investors remain skeptical about the success of
PPG's overtures.
The standoff comes amid a wave of consolidation in the chemicals
industry, including a $120 billion merger of U.S. giants Dow
Chemical Co. and DuPont Co., and Bayer AG's planned $57 billion
takeover of Monsanto Co., as the industry contends with weak growth
and overcapacity.
Some analysts have considered Akzo's takeover defense a major
obstacle to PPG acquiring its Dutch rival unless the two sides can
agree on friendly terms. Akzo's articles include so-called priority
shares, which give holders "ultimate discretion" over the
composition of Akzo's management and supervisory boards, according
to Olivetree Financial, a research firm that specializes in
analyzing takeovers.
"There is no real way in which an unwanted suitor can force its
way into Akzo, even with the progression of time," Olivetree wrote
in a recent report.
However, Elliott is betting that it can successfully challenge
the power of Akzo's priority shares if necessary. The activist fund
manager argues that shareholders totaling at least a 10% stake in
Akzo can call for a shareholder vote to remove members of the Dutch
company's management and supervisory board members, if a majority
of shareholders support the move.
If Akzo "is remiss in its governance obligations to
shareholders, Elliott will consider appropriate remedies, including
possibly requesting the convocation of an [extraordinary general
meeting] of Akzo Nobel," the hedge fund said in a release.
In its new proposal, PPG offered EUR56.22 in cash and 0.331 PPG
shares for each Akzo share. Its previous offer was EUR54 in cash
and 0.3 PPG shares.
Akzo said a merger would lead to a large number of disposals
because of overlaps in both geography and business lines, and would
lead to significant job cuts.
The Dutch company also cited a "culture gap" between the two
firms.
"We are convinced that Akzo Nobel is best placed to unlock the
value within our company ourselves," Mr. Büchner said.
Mr. Büchner said Akzo plans to separate its special-chemicals
division, a move it had said it was considering in response to
PPG's initial unsolicited offer. He said the company was weighing
various strategic options for the separation but hadn't yet decided
which to pursue. The split will be reflected in Akzo's financial
guidance "soon," he said.
PPG, whose brands include Pittsburgh Paints, Olympic and
Glidden, said earlier this month that it continued to believe in
the strategic rationale for the deal despite the initial rejection.
In a statement Wednesday, PPG defended its latest offer, arguing it
provides Akzo shareholders with "substantial" upfront cash and
shares to benefit from any takeover. PPG said Akzo's board has so
far declined to discuss any of the proposals.
The takeover tussle puts at odds two of the world's oldest
industrial companies. Akzo Nobel, which counts Dulux, Sikkens,
Interpon and Eka among its brands, was created from the merger of
paint and chemicals companies in Sweden and the Netherlands that
dated back more than a century. Among them was a chemicals firm
founded by Alfred Nobel, who launched the prizes that bear his
name. After the merger in 1994, Akzo acquired two of Britain's
oldest paint and chemicals firms.
PPG, founded in 1883 as Pittsburgh Plate Glass Co., was the
first U.S. company to successfully market large sheets of glass,
until then an expensive rarity. It quickly expanded into chemicals
to secure a supply of raw materials and was an early supplier of
the automotive and aviation industries.
Monica Houston-Waesch
and
Christopher Alessi
in Frankfurt contributed to this article.
Write to Ben Dummett at ben.dummett@wsj.com and Ian Walker at
ian.walker@wsj.com
(END) Dow Jones Newswires
March 22, 2017 08:56 ET (12:56 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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