For once, Elliott's Paul Singer may have lost, if only for the next six months. On Thursday morning, U.S. paints and coatings giant PPG Industries announced it had dropped its pursuit of paintmaking rival Akzo Nobel NV and will not make a formal bid after the Dutch maker of chemicals and coatings refused to discuss a sweetened $29.5 billion offer. Under Dutch securities rules, PPG may not approach Akzo again during a six month cooling-off period. PPG CEO Michael McGarry said the company had made a final approach to Akzo last week, but the company did not respond. “Akzo Nobel’s boards have consistently refused to engage and did not respond to our call or letter,” PPG Chief Executive Officer Michael McGarry said in the statement. “As a result, we believe it is in the best interests of PPG and its shareholders to withdraw our proposal to Akzo Nobel at this time.”
In April, PPG had proposed a takeover deal then worth about 26.3 billion euros ($29.5 billion), or 95 euros per share.
In addition to the possibility of raising its offer, PPG said Thursday it would consider paying Akzo Nobel shareholders a “ticking fee” of 10 cents a share for every month of delay in closing a deal past a 15-month target. The U.S. company said the offer was an effort to dispel worries expressed by Burgmans about any agreement running afoul of regulators. PPG also offered as much as 50 million euros towards retaining top management.
The decision to walk away came after a large group of Akzo Nobel shareholders led by hedge fund titan Elliott Advisors on Monday lost a bid in court to try to force Akzo's boards to engage in talks with PPG.
# A Dutch court on May 29 rejected a petition by Elliott, billionaire Paul Singer’s New York hedge fund, to force a shareholder vote on firing Burgmans. The fund claimed he was in “flagrant breach” of his duties to investors for rejecting PPG’s offers. The company reiterated its support for the chairman, saying Burgmans had played a crucial role in evaluating and rebuffing the latest bid.
Akzo has argued a PPG takeover would be bad for employees, that the companies' cultures don't mesh, that a deal faces antitrust risks and that Akzo should stay Dutch in the country's national interest. Also in April, Akzo presented its case for remaining independent, offering shareholders 1.6 billion euros in extra dividends and detailing plans to sell or float its chemicals subsidiary, which represents a third of company sales and profits.
“The deal collapsed because Akzo Nobel just did not want it, and as long as the current management board and supervisory board are there, I don’t see that changing,’’ ABN Amro Bank analyst Mutlu Gundogan told Bloomberg. “It’s not a mega-surprise that PPG is withdrawing.”
In muted response, Akzo shares droped modestly by less than 2%, as investors had apparently priced in the decision given Akzo Nobel's fierce opposition to a deal and strong poison pill protections in case PPG had decided to press ahead with a hostile bid. What is more interesting is that Akzo's shares have held their gains even after the bid was dropped, suggesting expectations of further M&A in the company's future...
Akzo Nobel said in a statement it would pursue a strategy of “accelerating sustainable growth and profitability and creating two focused, high-performing businesses.” As an alternative to a takeover, the Amsterdam-based company has proposed to hive off its chemicals business.
PPG’s decision capped a frustrating three-month courtship. Akzo Nobel rejected the U.S. company’s third takeover bid May 8, defying pressure from shareholders such as Elliott Management Corp. to negotiate. McGarry flew to Rotterdam last month in an attempt to get talks under way. But Akzo Nobel CEO Ton Buechner and Burgmans were unwilling to negotiate during a 90-minute airport meeting....