PPG’s €26.3bn takeover of Dulux parent is dead

Akzo Nobel shareholders unhappy that group refused to enter talks about deal

US paints and coatings maker PPG Industries has dropped its attempt to buy Dutch rival Akzo Nobel in a €26.3 billion deal, stung by repeated rejections from the company, legal defeats and hostility from Dutch politicians.

Although it has retained its independence, Akzo must make good on promises it made to appease shareholders unhappy after it refused to enter talks with Pittsburgh-based PPG.

After PPG’s interest became known in March, Akzo set higher performance targets, promised €1.6 billion in extra dividends and unveiled plans to sell or float a chemicals subsidiary, which represents a third of company sales and profits.

Akzo Nobel shares traded down 1.2 per cent at €73.63 after PPG’s announcement – far below the figure of around €95 per share that PPG’s final cash and share proposal in April represented.


PPG called off its pursuit on Thursday after almost three months.

“We believe it is in the best interests of PPG and its shareholders to withdraw our proposal to AkzoNobel at this time,” PPG chief executive Michael McGarry said in a statement.

PPG may not approach Akzo again during a six month cooling-off period.

Meshing cultures

In arguing against a PPG takeover, Akzo said it would be bad for employees, that the companies’ cultures did not mesh, and that a deal would face antitrust risks.

Akzo chief executive Ton Buechner said he believes the company's new strategy will lead to a "step change in growth and long-term value creation for our shareholders and all other stakeholders".

He said the company was committed to “an open and constructive dialogue with our shareholders and all other stakeholders.”

That follows a court ruling on Monday in which a judge ordered the company to communicate better with its shareholders, without specifying how.

A group of institutional shareholders representing about 18 per cent of the company’s shareholder base and led by hedge fund Elliott Advisors lost a bid at the Amsterdam Enterprise Chamber on Monday to force Akzo’s boards to engage in talks with PPG.

Elliott declined comment on Thursday.

Michael Wegener, Managing Partner at Case Equity Partners, who had invested around 6 percent of his fund in Akzo shares after PPG's interest became known in March, said he is now carefully considering next steps.

Akzo shares stood at €64.42 on March 8th before news of an approach broke.

“The share price is holding up astonishingly well,” said Wegener.

“My initial response was to cut the position in half from over 6 percent? and then hold the rest for six to 12 months. But given how well the share price is holding up, I want to ponder more than making a hasty decision.”

Dutch nationalism

Although Akzo’s poison pill powers may have played a role in convincing PPG not to pursue a hostile bid, the PPG bid itself may lead to more government influence over takeover battles.

When PPG's interest became known one week before national elections on March 15th, Dutch economic affairs minister Henk Kamp branded an Akzo Nobel takeover as "not in the national interest."

Chief executive Mr Buechner argued in interviews that Dutch multinationals were part of the country’s vital infrastructure, as they account for a disproportionate amount of R&D spending.

Since then the cabinet has proposed a law that would give listed Dutch companies a one-year period in which managers may decline to engage in talks with a prospective foreign buyer, with no need to justify themselves to shareholders.

A parliamentary commission was meeting later on Thursday to hear that plan and other ideas, including the creation of a government panel with the power to block unwanted foreign takeovers.