Akzo Nobel concerns about an agreed deal with PPG are understandable, but wouldn’t materially impact the merged business in a negative way if managed carefully, Citi (buy) says in note.
- Says the value creation from synergies from a PPG merger are not possible from Akzo’s standalone proposals
- Notes that new strategy of spinning off specialty chemicals and increased dividends should still support the shares
- Akzo shares have a "warrant" attached, this being the potential offer from PPG that is not discounted in the price, whether offer is made now or in the future
- Akzo’s rejection of an offer of EU96/share needs to be looked at in the context of current share price of EU75
- Adds that given the synergies from PPG offer available and "stranded costs" from Akzo’s strategy, evident as to why this gap exists to offer price
- See upside to shares with Akzo remaining quoted, separation of chemicals should help deliver this value
- Akzo PT EU90 derived from sum-of-the-parts valuation, specialty chemicals valued at 9.4x EV/Ebitda, paint business on 13x EV/Ebitda