Why Akzo insists on rejecting PPG’s offer?


The U.S. based paint maker PPG Industries increased its offer for Dutch Akzo Nobel by about 8 percent. With this final increase the offer reached 26.9 billion euros. PPG authorities stated that this is the final invitation to Akzo Nobel to negotiate with them. Akzo had rejected two previous proposals of PPG. Thus, PPG Industries is playing their last trump and trying to make a strong pressure on its Dutch rival.

As PPG improved its proposal, shares of Akzo jumped 6 percent and reached the level of 82.95 euros. Shareholders of Akzo was unhappy about Akzo’s not accepting the proposal of PPG.

PPG Chief Executive, Michael McGarry, said in an interview that PPG authorities believe the deal would bring gains to them from the first year. And he added by the help of the support from Akzo shareholders, the Pittsburg-based PPG would submit a formal offer to the Dutch financial markets regulator by June 1, without waiting for the answer of Akzo.

On the other hand, the aothorities of Akzo Nobel announced that PPG made the third proposal, and the Board of Management and Supervisory Board of Akzo Nobel would carefully review and consider this proposal.

According to the sharehoders of Akzo, the PPG offer was worth more than the value Akzo could achieve as an independent company. PPG made significant concessions, not only on the break fee but also on employment, pension plans, research and development spending and the location of production facilities. According to the analysts, Akzo must enter the negotiations with PGG, because no other offer would include the same guarantees for stakeholders and employees.

Akzo had rejected the first two offers by saying it substantially undervalued the company and would be bad for other stakeholders, employees and customers.

While everyone has been wondering about the reason of Akzo remained unanswered, presented its case for remaining independent and offered shareholders 1.6 billion euros in extra dividends. The authorities of the firm also explained its plans to sell its chemicals subsidiary, which represents a third of company sales and profits. If Akzo succeeds to realize its plans, it will be a less attractive target for PPG. However, PPG states that synergies of $750 million between the companies’ paints and coatings businesses is the primary reason for their demand to take Akzo.

 

 

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