Cleveland, Ohio – PPG threw another $4.3 billion on its offer to buy Dutch coatings company AkzoNobel, bringing the unsolicited bid to $26.3 billion, but the answer is still no.
“We are convinced that AkzoNobel is best placed to unlock the value within our company ourselves,” CEO Ton Büchner said. “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.”
PPG’s $26.3 billion bid Wednesday followed a smaller offering two weeks earlier. With both bids, AkzoNobel officials said PPG was undervaluing the commercial and industrial paint supplier. In response to the first bid, Büchner said his company would generate some value to shareholders by selling or spinning off AkzoNobel’s specialty chemicals business.
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.
PPG Chairman and CEO Michael McGarry, said his company’s bid “provides (AkzoNobel shareholders) 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.”
McGarry said PPG’s offer represents a 40% premium to AkzoNobel stock prices from before the initial bid and a 39% premium to the company’s 52-week high price (again, prior to the initial bid which pushed AkzoNobel shares higher).
Büchner said AkzoNobel rejected the deal for several reasons, including:
- Divestitures – Where the two companies overlap, regulators will likely require a combined PPG/AkzoNobel to sell off some properties.
PPG officials disagreed, saying there are “clear paths to regulatory approval based on the broad, complementary geographic footprint of the businesses, and AkzoNobel has rejected PPG’s proposal that the companies’ respective antitrust experts meet to confirm approach.”
- Job cuts – Expected overlapping business units would make it easy for PPG to get rid of AkzoNobel engineers and line workers. “PPG provides no substantive commitments to employees, creating potential uncertainty for thousands of jobs worldwide,” AkzoNobel officials said.
PPG’s team responded, saying the Pittsburgh, Pennsylvania, company would honor existing labor deals and worker contracts, including social programs, pension plants, and other deals. Company officials also said they want to meet with their AkzoNobel executives and union leaders to work out employment-level deals.
- Cultural differences – AkzoNobel’s leaders said the company has a strong commitment to its communities and the environment, and they are concerned that PPG is not as socially committed.
PPG leaders countered that it greatly respects AkzoNobel’s social efforts, and they have instituted complementary policies in North America. “By adding PPG’s sustainability focus and its Colorful Communities projects together with AkzoNobel’s Planet Possible and Human Cities initiatives, the combined company can enhance the benefits to customers, the environment, and the communities in which people live and operate; and create a larger enterprise that will provide more personal growth opportunities for all our combined employees while enhancing our presence and importance in more communities around the world.”
PPG officials also said the company would maintain a strong presence in The Netherlands and would commit to being a good corporate citizen.”
Following the second bid rejection, some investor groups have begun pressuring AkzoNobel officials to meet with their PPG counterparts to discuss what could make such a deal work. But for now, Büchner and his team say they see nothing to gain from those talks.
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.