By Ben Dummett
LONDON -- American-style activism is storming the Old World.
Elliott Management Corp., one of the biggest activist investors
in the U.S., has emerged as a key player in a $24 billion,
trans-Atlantic standoff between two of the world's oldest
industrial companies. It is pushing Dutch paint and chemicals giant
Akzo Nobel NV -- which traces its roots in part to dynamite
inventor Alfred Nobel -- to enter into talks with PPG Industries
Inc., a Pittsburgh-based rival.
On Wednesday, Elliott threatened to use corporate rules unique
to the Dutch company's structure to call a special shareholders
meeting, in a bid to force Akzo's board to at least talk with PPG.
Akzo, based in Amsterdam, earlier in the day rejected a second,
sweetened takeover offer by PPG, valued at EUR22.37 billion ($24.19
billion).
The surprise move came after some analysts and other observers
had concluded Akzo's Dutch corporate structure, and the rules
peculiar to it, protected the firm from a takeover -- not made it
more vulnerable.
Activist shareholders are hardly novel in Europe. But they tend
not to be as aggressive or widespread as in the U.S. They also
don't target big household-name corporations like Akzo quite so
frequently. Many of Europe's biggest companies have structures that
can make an activist push less effective -- including shareholder
structures that include poison pills, controlling families or
foundations that can have an outsize say.
Elliott, which has been active in Europe for years, is proving
particularly creative in its approach with Akzo, an amalgamation of
Swedish and Dutch companies that date back more than a century, and
whose paint brands include Dulux.
Suitor PPG, founded in 1883 as Pittsburgh Plate Glass Co., now
mostly makes paints, too, including brands like Pittsburgh Paints
and Olympic.
Akzo's board and management remain opposed to a purchase by PPG,
and investors still see the deal as unlikely. The Dutch company's
shares fell 1.1% to EUR75.78 in Amsterdam Wednesday, trading at
steep discount to the latest offer price of EUR88.72 a share, which
Akzo rebuffed earlier in the day.
PPG's second approach came just weeks after Akzo rejected PPG's
initial EUR83-a-share offer. In both cases, Akzo said the offers
undervalues the company and doesn't warrant further talks.
Elliott, which owns a 3% stake in Akzo, on Wednesday agreed that
the new offer was too low, but the hedge fund is urging the board
to at least engage with PPG.
Elliott has fallen short in Europe before. In 2011, it lost a
battle to replace management at Swiss biotech company Actelion Ltd.
Earlier this year, Actelion agreed to sell itself for $30 billion
to Johnson & Johnson.
Other activists here are pursuing big prey in Europe. Hedge fund
TCI Fund Management Ltd. is urging Safran SA to abandon its planned
EUR8.5 billion takeover of Zodiac Aerospace SA. Last year, ValueAct
Capital Management LP won a seat on the board of British
aircraft-engine maker Rolls-Royce Holdings PLC.
Before PPG's initial bid, Elliott was already preparing a
proposal to persuade Akzo to split off its specialty-chemicals
business to boost the Dutch company's stock price, according to a
person familiar with the matter.
With PPG's offer now on the table, Elliott argues that Akzo
should negotiate with PPG to determine whether a takeover -- at a
higher price -- would generate more value for shareholders, the
person said.
Akzo said Wednesday it would spin off its specialty-chemicals
business, a move it previously said management was only
considering. But executives believe remaining independent is the
best way to benefit shareholders, employees, customers and other
stakeholders.
"This is just not about price," said Akzo Chief Executive Ton
Büchner in an interview. "This is about the impact it has on a
variety of stakeholders that is not always appreciated by the
Anglo-Saxon shareholder environment, but that is the law over
here."
Earlier this week, four Dutch provinces warned a combination
would threaten the loss of more than 5,000 jobs due to potential
overlap of the two companies' businesses.
Some analysts have considered Akzo's Dutch structure, including
what is seen as robust takeover defenses, as a major obstacle for
PPG winning out on anything other than 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. The priority shares
are held by Foundation Akzo Nobel, whose board comprises some
members of the company's supervisory board.
But Elliott maintains the company's rules also allows it to call
an extraordinary shareholders meeting if it gets at least 10%
shareholder support. It says it can then call for a shareholder
vote to remove members of the management and supervisory boards, if
a majority of shareholders support the move. Mr. Büchner declined
to specifically address the strategy.
Elliot would need more shareholders to join its cause, and has
won some early supporters. John Bennett, head of European equities
at Henderson Global Investors, wants Akzo to talk with PPG. "The
management team is rapidly losing credibility," he said. Henderson
owns a little less than 1% of Akzo's shares.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
March 22, 2017 17:47 ET (21:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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