AkzoNobel rejects second offer from PPG Industries

Dulux owner AkzoNobel has rejected a second unsolicited takeover bid from US chemicals manufacturer PPG Industries, saying it substantially undervalues the company.

Akzo also said the proposal neglects to address the significant uncertainties and risks for shareholders and other stakeholders.

The revised proposal represents a value of €88.72, adjusted for the final dividend, consisting of €56.22 in cash and 0.331 PPG shares, as at 20 March 2017, per AkzoNobel share. PPG had previously offered €83.00 per share.

The Dutch company said the proposal wold lead to significant job cuts as it includes synergies which can be expected to result in the restructuring of the combined employee base. It also highlighted the "significant culture gap" between both companies.

Chief executive officer Ton Büchner said: “This proposal significantly fails to recognize the value of 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.”

Private investment firm Elliott Management Corp, which owns a 3% stake in AkzoNobel, "noted with concern" the company's failure to engage with PPG in relation to the two bids it has put forward.

"Elliott has not found the reasons proffered by Akzo Nobel's Boards for failing to engage compelling," it said in a statement.

Elliott said that while the second bid is "inadequate", it is a "credible basis for engagement", representing a 39.7% premium to AkzoNobel's undisturbed price.

"It is only through engagement that Akzo Nobel can determine if PPG is prepared to bid at a level that provides adequate consideration to shareholders."

Elliott added that Akzo has not adequately consulted with shareholders before rejecting both bids, saying that had it done so, it would most likely have found that most shareholders want the boards to engage with PPG.

At 1332 GMT, the shares were down 2% to €75.04.