AkzoNobel considers M&A options; remains averse to foreign takeover
06 APR 2018
- Akzo to use the momentum of the specialty sale for acquisitions
- Revival of Axalta talks may be next step
- Any major deal likely to have share component
AkzoNobel [AMS:AKZA] is exploring several tracks for potential transactions after agreeing the sale of its specialty chemicals unit, but remains averse to a foreign takeover, according to a source close to the company and a source briefed on the matter.
A new takeover approach for Akzo from PPG [NYSE:PPG] or Axalta Coatings [NYSE:AXTA] is very likely, according to three sector bankers and a Dutch lawyer. It is undeniable that PPG will try again; and after the separation of the specialty chemicals, Akzo will probably be an easier target for PPG, the lawyer speculated.
With Akzo as a pureplay paints and coatings company, it would not be surprising to see several different scenarios, with a deal possibly taking "several shapes and forms", the first banker said. A likely scenario could be Axalta and Akzo pursue an all-stock merger and then PPG would top it with a cash bid, but this time it would have to be friendly, the banker speculated.
A new approach from PPG is indeed expected, the source close agreed, conceding that it was very poorly handled the last time around.
In June last year, PPG abandoned its pursuit of Akzo after the Dutch company consistently rebuffed its proposals. The company also faced significant political opposition to its unsolicited approach. Under Dutch takeover law, PPG faced a six-month cooling-off period, which expired in December, enabling it to now make a renewed approach.
Yet, almost a year later, the anti-foreign hostile takeover sentiment has not changed in the Netherlands, the sources and the lawyer concurred.
Yet, almost a year later, the anti-foreign hostile takeover sentiment has not changed in the Netherlands, the sources and the lawyer concurred.
Despite its latest transaction to sell the specialty chemicals unit to US private equity fund Carlyle Group and Singaporean sovereign wealth fund GIC, Akzo is still very much a Dutch business and wants to remain that way, the source briefed said. This deal was very much "a one-off", he said. The drivers for this deal were different, with Akzo having to return cash to their investors one way or another, the source continued. It did not mean Akzo was more open to a foreign takeover, he added.
On 27 March, Akzo announced the sale of 100% of its specialty chemicals business to Carlyle Group and GIC for an enterprise value of EUR 10.1bn. The transaction is expected to be completed before the end of 2018.
What is for certain is that Akzo will not remain an independent company, a second banker said. There will be a merger of some sort and there are several people interested, this banker said.
On 27 March, Akzo announced the sale of 100% of its specialty chemicals business to Carlyle Group and GIC for an enterprise value of EUR 10.1bn. The transaction is expected to be completed before the end of 2018.
What is for certain is that Akzo will not remain an independent company, a second banker said. There will be a merger of some sort and there are several people interested, this banker said.
The company has been significantly undermined by the way it poorly managed the hostile approaches from PPG and nobody believes in a standalone strategy that would be long-lasting and competitive, he argued. Akzo will not last a day as a stand-alone company, this banker said.
Akzo does not have new defence mechanisms in place should PPG made an approach again, but its best defence remains an active management that delivers the best results for its shareholders and stakeholders, the source close said.
Following the agreement to sell specialty chemicals, Akzo is looking at every possible option for its paintings and coatings business, the sources said.
Things are likely to move rather quickly, with Akzo using the momentum from the successful sale of its specialty chemicals unit to restore its reputation and reposition its business, the source briefed said. The deal had a tremendous impact on its share price, which positions it in the driving seat again, the source close added.
Akzo CEO, Thierry Vanlancker, said during a conference call on 27 March, that the company is looking at possibilities to grow including bolt-on acquisitions, adding that larger acquisitions are possible, but the company would need to go back to their shareholders for approval.
Reviving merger talks with Axalta could be the next step on Akzo’s to-do list, the second banker said.
On December 15, Axalta executive vice president and CFO Robert Bryant said that the company will keep the door open for new merger talks with Akzo. Previous merger negotiations between the two companies failed after Axalta received a takeover bid from Japanese competitor Nippon Paint [TYO:4612], which ultimately did not come to fruition.
A merger with Axalta would be a huge deal and will likely include a stock component, with Akzo taking the lead, a third banker said.
The vast majority of net proceeds from the sale of the specialty chemicals will be distributed to shareholders, so a major acquisition with a cash offer is unlikely in the short term, the source close said.
If Axalta and Akzo were to merge, they would be required to shed some powder coatings assets to get any deal past the European Commission (EC), as previously reported by this news service.
Following the agreement to sell specialty chemicals, Akzo is looking at every possible option for its paintings and coatings business, the sources said.
Things are likely to move rather quickly, with Akzo using the momentum from the successful sale of its specialty chemicals unit to restore its reputation and reposition its business, the source briefed said. The deal had a tremendous impact on its share price, which positions it in the driving seat again, the source close added.
Akzo CEO, Thierry Vanlancker, said during a conference call on 27 March, that the company is looking at possibilities to grow including bolt-on acquisitions, adding that larger acquisitions are possible, but the company would need to go back to their shareholders for approval.
Reviving merger talks with Axalta could be the next step on Akzo’s to-do list, the second banker said.
On December 15, Axalta executive vice president and CFO Robert Bryant said that the company will keep the door open for new merger talks with Akzo. Previous merger negotiations between the two companies failed after Axalta received a takeover bid from Japanese competitor Nippon Paint [TYO:4612], which ultimately did not come to fruition.
A merger with Axalta would be a huge deal and will likely include a stock component, with Akzo taking the lead, a third banker said.
The vast majority of net proceeds from the sale of the specialty chemicals will be distributed to shareholders, so a major acquisition with a cash offer is unlikely in the short term, the source close said.
If Axalta and Akzo were to merge, they would be required to shed some powder coatings assets to get any deal past the European Commission (EC), as previously reported by this news service.
In addition, the two companies are in two different parts of the world and a merger of equals would be rather difficult to implement, the lawyer said. The Dutch element will have to be prevalent should a merger with Axalta be explored again, but the deal will likely face cultural and implementation issues, he warned.
PPG and Axalta declined to comment.
Akzo is currently focused on delivering its next strategy plan to get a 15% return on sales by 2020, a spokesperson for Akzo said.
PPG and Axalta declined to comment.
Akzo is currently focused on delivering its next strategy plan to get a 15% return on sales by 2020, a spokesperson for Akzo said.