A bitter three-month takeover fight between two of the world’s largest paint and coatings companies was won by Dutch group Akzo Nobel on Thursday after American rival PPG Industries said it was abandoning its €26.9bn pursuit.
Despite weeks of threats from PPG that it would take its offer directly to Akzo shareholders, the Pittsburgh-based group decided to walk away, withdrawing its takeover proposal for the maker of paints including household brand Dulux.
The assault on Akzo, which was egged on by the activist hedge fund Elliott Advisors, would have created a dominant leader in the $130bn paints and coatings sector at a time when the broader chemicals industry is undergoing a ferocious round of consolidation.
But Michael McGarry, the PPG chief executive who has been repeatedly rebuffed by Akzo’s leadership, said he abandoned the attempt after his latest overture went unanswered.
“We made a final attempt for engagement late last week and through a letter to Akzo,” Mr McGarry said in a statement. “However, Akzo’s boards have consistently refused to engage and did not respond to our call or letter.”
Shares in Akzo moved little on the decision, closing up 0.6 per cent in Amsterdam trading at €74.93, giving it a market value of €18.6bn and reflecting investors’ expectations that PPG’s advances were already doomed to failure.
The unsuccessful bid also marks the latest example of one of America’s largest companies being rebuffed by a major European company, highlighting the political difficulty of securing a cross-border takeover without the co-operation of the target.
Other high-profile failures include Kraft Heinz’s $143bn bid to buy Anglo-Dutch consumer group Unilever, Monsanto’s multiple attempts to acquire Swiss agribusiness rival Syngenta and Pfizer’s effort to buy UK pharma group AstraZeneca.
Akzo said it told PPG that it had received Mr McGarry’s letter and its board was “fully evaluating” it before the withdrawal. Akzo chief executive Ton Büchner said the company would continue to focus on its own strategy of creating two businesses, paints and coatings and speciality chemicals.
“We believe this will lead to a step change in growth and long-term value creation for our shareholders and all other stakeholders,” Mr Büchner said on Thursday.
Fuelled by an abundance of cheap debt and an inability to grow organically, companies in the chemicals sector have used large-scale acquisitions as a way to cut costs and boost their earnings.
PPG’s initial approach made by Mr McGarry in early March was immediately met with hostility by Mr Büchner. It was soon after greeted with fury from the Dutch political establishment, some of whom took to Twitter to defend the 225-year-old company using the hashtag #DutchPride. News of the bid emerged just days before national elections.
However, PPG quickly found support among many top Akzo shareholders including Elliott, which holds a large stake in the business and tried to bend the Dutch company’s board into engaging with the US suitor. Elliott failed in an attempt to call a special shareholder meeting to oust Akzo chairman Antony Burgmans.
The US company’s third and final offer was rejected in May. It valued Akzo at €26.9bn including debt and the Dutch company’s shares at €96.75 each.
The PPG offer comprised €61.50 in cash per share, with the remainder in PPG shares. The bid included plans to pay Akzo’s normal dividend as well as a special dividend that the Dutch company promised shareholders as part of its own standalone plan to spin off its specialty chemicals business.
PPG’s previous cash-and-stock offers of €83 and €90 a share were rejected.
In addition to the value of the offer, Mr Büchner has argued that the PPG offer failed to address stakeholder concerns and the prospects of a lengthy antitrust review.
In recent weeks, however, many investors have told the Financial Times they disagree with Mr Büchner’s approach and the board’s near-refusal to engage with its US suitor in a constructive manner. “I think Akzo has bigger challenges ahead than PPG to justify its current share price,” said Graham Copley of SSR, the investment research firm.
Under takeover rules in the Netherlands, PPG faces a six-month “cooling off” period, during which it cannot make further bids for Akzo. The company had tried to get a June 1 deadline extended, but the request was struck down this week by a Dutch court, which also threw out a case brought by Elliott to oust Mr Burgmans.
Additional reporting by Mehreen Khan
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