Cleveland, Ohio – Will third time be the charm? PPG has upped its bid for Dutch coatings company AkzoNobel to $28.8 billion, $2.5 billion more than its late-March offer and $6.8 billion more than its early March opening bid.
More importantly, AkzoNobel’s board didn’t immediately reject the latest offer as it did the first two, saying the company will “carefully review and consider this proposal.”
Since PPG made its initial offer, executives at AkzoNobel have been under pressure to show how the company could be more valuable than the amount the Pittsburgh, Pennsylvania-based paint producer was offering. High-profile investors criticized AkzoNobel’s board for rejected prior offers and not entering formal negotiations with PPG to fight for a higher bid.
When he rejected PPG’s second bid, AkzoNobel CEO Ton Büchner listed several reasons why the deal was not in the best interests of shareholders and employees – the potential for forced divestitures of business units to satisfy regulators, the likelihood of job cuts to eliminate overlapping product lines, and cultural differences such as dedication to charitable giving.
PPG Chairman and CEO Michael McGarry sent his latest bid in a letter to AkzoNobel’s board, that noted that the $28,8 billion figure is “one last invitation to you and the AkzoNobel boards to reconsider your stance and to engage with us on creating extraordinary value and benefits for all of AkzoNobel’s stakeholders.”
McGarry’s letter said, “Our revised proposal represents a second increase in price along with significant and highly-specific commitments that we are confident AkzoNobel’s stakeholders will find compelling. We stand ready to work with you expeditiously to complete a targeted due diligence review and to negotiate a definitive agreement for the combination.”
Though primarily an industrial coatings company, AkzoNobel is involved in powder coating and wet coating for the automotive and commercial truck industries, markets that PPG dominated in North America.
The rest of PPG’s proposal contained a few carrots and more than a few sticks to get AkzoNobel management to negotiate terms.
On the pot-sweetening side, PPG officials pledged to fight any breakup demands from regulators and maintain strong community ties in The Netherlands. On the employee front, PPG officials pledged that “no AkzoNobel employee currently working in a Netherlands specialty chemicals plant will lose their job as direct result of this acquisition.” PPG also will commit to respecting current union contracts, buyout plan terms, and return rights for workers who have been laid off by AkzoNobel.
However, the tone of PPG’s letter echoed some criticisms from shareholders who support the merger. AkzoNobel responded to PPG’s initial offer by pledging to sell or spin off its specialty chemicals division to focus on its core coatings products.
McGarry’s letter says that move “creates two smaller, unproven standalone companies with uncertain market valuations and substantial risks for reaching its 2020 guidance, especially given many of the annual targets that AkzoNobel has identified have not been achieved previously.”
About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 17 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.