Dutch coatings manufacturer AkzoNobel N.V. (AKZA.AS; AKZOY) has rejected the second offer of $24.5 billion euro ($26.3 billion) from Pittsburgh-based PPG Industries (NYSE:PPG).
 
In a statement, AkzoNobel said the second proposal, like the first offer of $22.08 billion, fails to reflect the current and future value of AkzoNobel, and it also doesn't address uncertainties and risks for shareholders and other stakeholders.

"This proposal significantly fails to recognize the value of AkzoNobel," said Ton Büchner, CEO, AkzoNobel. "Our Boards do not believe it is in the best interest of AkzoNobel's stakeholders, including our shareholders, customers and employees. That is why we have rejected it unanimously.
 
"We are convinced that AkzoNobel is best placed to unlock the value within our company ourselves. We are executing our plan, including the creation of two focused businesses and new cost structure, and believe this gives us a strong platform for continued profitability and long term value creation for all our stakeholders with substantially less execution risks," he added.

In its view, AkzoNobel believes that the proposal does not address concerns expressed by the board in its initial rejection in March:

  • Is not in the best interests of shareholders. It substantially undervalues AkzoNobel and fails to reflect the value creating opportunities of the new strategic direction and focus for both the Specialty Chemicals and the Paints and Coatings businesses, allowing them to build further on their respective leadership positions.
  • Contains significant risks related to the increased stock component and the high leverage of the proposed combined businesses.
  • Would result in a large number of substantial divestitures due to the major geographical and segment overlap of both companies across Decorative Paints and Performance Coatings, bringing into question value leakage. It does not address the significant risk and uncertainty, including timing, of deal completion due to extensive anti-trust concerns.  These anti-trust issues would have a significant negative impact on employees and customers which will affect the integrity of AkzoNobel.
  • Will lead to significant job cuts. It includes synergies which can be expected to result in the restructuring of the combined employee base, leading to job losses.  PPG provides no substantive commitments to employees, creating potential uncertainty for thousands of jobs worldwide.
  • Does not address fundamental stakeholder concerns and uncertainties, nor does it substantiate any tangible solutions in relation to, among others, R&D, pensions and employees
  • Does not meaningfully address our concerns regarding community contribution and sustainability and the significant culture gap between both companies, including how any issues arising from this would be addressed.

PPG executives mount public campaign

According to published reports, executives from PPG traveled to Amsterdam for face-to-face meetings with AkzoNobel stakeholders in an effort to exert more direct pressure.

“We believe the revised proposal presents an opportunity for AkzoNobel’s shareholders to realize extraordinary value, by any measure, for their shares in AkzoNobel. It provides them with a premium valuation and the opportunity to receive substantial and immediate cash consideration and participate in the success of the enterprise through ownership of shares in the combined company,” said PPG Chief Executive Michael McGarry in a statement.

McGarry also told Reuters that the company "was not considering another improved offer or a hostile bid for the time being, believing AkzoNobel's investors will force the company's boards to change their mind." But he is willing to meet with any stakeholder. "I offered to come over here any time, any day, any place," he told the wire service.

According to the latest reports, Büchner had not agreed to a meeting with McGarry. However, pressure is growing for both sides to hammer out some sort of agreement.

One of AkzoNobel's largest shareholders, Elliott Advisors, said in a statement that it "does not appear that AkzoNobel has adequately consulted with shareholders before rejecting both bids."

The statement from Elliott continues with an admonition to Akzo Nobel to immediately engage in talks with PPG:

"It is unfair for Akzo Nobel to continually criticize PPG's offers for failing to address stakeholder concerns if Akzo Nobel has been unwilling to engage with PPG to articulate precisely what those concerns are and suggest possible solutions...Elliot urges AkzoNobel to engage with PPG immediately to determine whether PPG is prepared to bid at a level that provides adequate consideration to AkzoNobel shareholders and whether PPG can adequately address all relevant stakeholder considerations. At this juncture, Elliott is disappointed by AkzoNobels conduct in relation to PPG's bids, and concerned that AkzoNobel appears to be ignoring the will of shareholders which seems to strongly support engagement with PPG."