Blog Coverage PPG Industries’ Merger Proposal Rejected by AkzoNobel

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LONDON, UK / ACCESSWIRE / March 10, 2017 / Active Wall St. blog coverage looks at the headline from PPG Industries, Inc. (NYSE: PPG). In an official communication from PPG Industries on March 09, 2017, the Company confirmed that they had put forth an unsolicited merger proposal to Akzo Nobel N.V. (“AkzoNobel”) on March 02, 2017. However, Akzo Nobel rejected PPG’s proposal and is now considering unlocking shareholder value by divesting its Specialty Chemicals Business. Register with us now for your free membership and blog access at:

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One of PPG Industries’ competitors within the Specialty Chemicals space, International Flavors & Fragrances Inc. (NYSE: IFF), reported on February 16, 2017, financial results and strategic achievements for the fourth quarter and full year ended December 30, 2016. AWS will be initiating a research report on International Flavors & Fragrances in the coming days.

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PPG’s Proposal and its vision for the merger

PPG had offered to acquire all issued and outstanding shares of AkzoNobel at €54.00 in cash plus 0.3 PPG’s share for each of AkzoNobel’s shares. The value of the transaction works out to approximately €21 billion.

PPG believes that the merger with AkzoNobel has great strategic and financial value. The merger would create a global strong leader in the paints, coatings, and specialty materials segment. The merger would help in huge cost savings as similar products, technologies, and overlapping markets could be eliminated. The merger would create a financially strong organization with investment grade credit ratings which can take on any competition easily.

PPG’s vision was to have a merged Company which has the best of both Companies including its work culture and best practices. The combined Company would continue to offer flagship brands of both Companies, take the various R&D initiatives forward and exist as best employers and corporate citizens.

PPG has invested a great deal of time and effort in weighing in the pros and cons of the merger with inputs from its legal and financial advisors., PPG still believes that its merger proposal has strong fundamentals and PPG has the wherewithal to easily pull off the deal. However, following AkzoNobel’s rejection, PPG will make future plans only after careful consideration.

Sharing his views on the matter, Michael McGarry, Chairman and CEO of PPG, said, “PPG has long admired AkzoNobel’s businesses, global presence, culture and principles as well as its advances in innovative product development and sustainable business practices. We believe a combination of our two Companies is a very compelling strategic opportunity.”

AkzoNobel’s Reaction

AkzoNobel confirmed that it had received the unsolicited proposal from PPG to merge. However, AkzoNobel rejected PPG’s proposal after careful consideration of all facts and after taking the advice of its legal and financial experts. AkzoNobel rejected PPG’s offer as it undervalues AkzoNobel and does not take into account its potential for long-term value creation. AkzoNobel also feels that PPG may not be able to pull off the merger and it carries many risks in terms of anti-trust issues, matters related to the pension schemes, and the feasibility of achieving the projected cost synergies. AkzoNobel feels that the proposal is not in the best interest of its stakeholders including shareholders, employees, and customers. AkzoNobel feels that the timing of the proposal may not create value for its shareholders. The proposal would create uncertainty and the possibility of job loss for its employees.

AkzoNobel’s Strategic Options for its Speciality Chemicals Business

Netherlands-based AkzoNobel is a global player in the paints, coatings, and speciality chemicals business. AkzoNobel announced on March 09, 2017 that it is reviewing various options for divesting its Speciality Chemicals Business. The strategic options include change of ownership, listing of the business as an independent entity etc. The decision on the matter will hinge on various factors like value maximization for its shareholders, impact of the decision on its stakeholders etc. The decision for divestment comes in after the unsolicited proposal received from PPG. The divestment will allow the Specialty Chemicals business to build and grow into a leading player across the various market segments that it caters to and AkzoNobel will be able to unlock shareholder value from within its own Company. The divestment will allow AkzoNobel to focus on its Paints and Coatings business.

AkzoNobel’s business operations are divided into three verticals: Decorative Paints, Performance Coatings, and Specialty Chemicals.

The specialty chemicals are used in paints, detergents, foods, plastics, cosmetics, construction, pulp and paper, pharmaceuticals, electronics, agriculture and for producing petroleum products. For FY 2016, the Specialty Chemical vertical’s revenues were approximately €4.8 billion which is 34% of the total revenues earned by AkzoNobel.

Commenting on the matter Ton Büchner, CEO, AkzoNobel said:

“Our Specialty Chemicals business is an industry leader in many of the markets in which it operates and we are extremely proud of its heritage, performance, and people. We are reviewing strategic options to separate it from the Company.”

Stock Performance

At the closing bell, on Thursday, March 09, 2017, PPG Industries’ stock fell 3.65%, ending the trading session at $102.93. A total volume of 5.75 million shares were traded at the end of the day, which was higher than the 3-month average volume of 1.72 million shares. In the last month and previous three months, shares of the Company have advanced 3.33% and 7.40%, respectively. Moreover, the stock gained 9.05% since the start of the year. The Company’s shares are trading at a PE ratio of 48.81 and have a dividend yield of 1.55%.

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