Belfast Telegraph

PPG Industries ups the ante in takeover pursuit of Dulux firm AkzoNobel

US chemicals giant PPG Industries has upped the ante in its takeover pursuit of AkzoNobel by sweetening its offer for a second time.

The Pittsburgh-based suitor has bolstered its cash and share bid for the Dulux paint maker by 8% to 96.75 euro per share, with the potential tie-up now valued at 26.9 billion euro (£22.8 billion).

In a letter to the Dutch firm's board, PPG chief executive Michael McGarry said he was "extending this one last invitation" for AkzoNobel to back its takeover approach.

He said: "Despite your rejections, private and public, of our invitations to date, we are confident you will find that a combination of our two companies will be beneficial to your stakeholders - and more beneficial than the revised strategy that you recently announced in response to our proposals.

"Our revised proposal represents a second substantial increase in price along with significant and highly-specific commitments that we are confident AkzoNobel's stakeholders will find compelling."

PPG said the proposed deal would deliver annual cost savings of 750 million US dollars (£585 million) and was "vastly superior" to the Dutch firm's plans to stay independent.

As part of the improved offer, the American firm said it would not shift any production from Europe to the US.

It also vowed to keep the headquarters for the marine and protective coatings business, and the decorative coatings and speciality materials arm, in the UK and the Netherlands respectively.

In response to the fresh approach, AkzoNobel confirmed it had received "a third unsolicited and conditional proposal from PPG for all outstanding share capital of the company".

It added: "In accordance with its fiduciary duties and acting under the Dutch governance code the board of management and supervisory board of AkzoNobel will carefully review and consider this proposal."

AkzoNobel announced last week that it would return 1.6 billion euros (£1.3 billion) to shareholders in 2017 through a new strategy that will lead to the creation of two separate firms by hiving off its Specialty Chemicals business for its paints and coatings arm.

It came as the company beat expectations with record profits, chalking up a 13% rise in earnings to 376 million euros (£314 million) in the first quarter of this year, with revenues climbing 7% to 3.7 billion euros (£3.1 billion) over the period.

The Polycell manufacturer, which employs 3,000 staff across the UK, has previously warned that any deal with PPG would trigger ''significant job cuts'' and create uncertainty for thousands of workers across the globe.

However, the company is under pressure from shareholders to embrace the deal, with activist investor Elliott Advisors calling for an extraordinary general meeting (EGM) where investors can vote to remove AkzoNobel chairman Antony Burgmans.

Known for its strong-arm tactics, Elliott, which holds a stake worth more than 3%, said it would attempt to oust AkzoNobel's managers if the company refused to commence talks with PPG.

The paint maker rejected the request for the EGM earlier this month in a bullish response that saw it accuse Elliott Advisors of sharing ''price sensitive information''.

AkzoNobel reported the investment company to the Dutch Authority for the Financial Markets (AFM) and told Elliott to outline its relationship with PPG Industries.

The Dutch firm announced plans earlier this year to build a 12.6 million euro (£10.7 million) innovation hub near Gateshead, safeguarding 270 jobs.

It is also looking to launch a 110 million euro (£93.7 million) Dulux paint factory in Ashington, Northumberland.

Professor John Colley, of Warwick Business School, said PPG's new offer has given AkzoNobel little option but to engage.

He said: "PPG are taking advantage of a strong dollar, high share price, and low borrowing costs to mount a somewhat opportunist bid. PPG have threatened a hostile bid if this does not elicit a negotiation. That will probably not be necessary.

"Chairman of the board Antony Burgmans turned down the previous bid within 24 hours, whilst CEO Ton Buchner outlined in detail the unwanted issues of a cultural mismatch, lost sustainability agenda, job losses and competition issues. However it appears shareholder consultation was limited and that their interests were being ignored."

"Boards have very different interests to shareholders," he added. "Boards aspire to status, power, pay and to continue in their job. Shareholders want created value through increasing dividends and share price.

"A substantial bid is likely to deliver far more value than they would ever otherwise see from the shares. Failures in corporate governance which allow boards to ignore value creation for shareholders often result in the emergence of activists such as Elliott."

A spokesman for Elliott Advisors said it was encouraged by the comments from AkzoNobel that it would "carefully review and consider" PPG's latest offer.

"Elliott continues to believe that it is in the interest of all stakeholders for AkzoNobel's boards to accept PPG's invitation to enter into sincere and constructive discussions about a potential combination with PPG," the investment firm said.

"Elliott further notes that PPG has characterised its proposal as a 'last invitation'. We understand from this that PPG will make no further attempts to engage in friendly discussions.

"There can be no assurance that a hostile bid - if one were to materialise - would include the same or improved protections and undertakings for Akzo Nobel stakeholders. Elliott therefore believes that friendly discussions now are in the best interest of all stakeholders."