PPG raises buyout offer for Akzo Nobel to $28.8 bn, threatens to go hostile

US Fortune 500 paints and coatings major PPG Industries Inc yesterday raised its buyout offer for its Dutch rival Akzo Nobel to €26.9 billion ($28.8 billion), threatening to take its offer hostile if the board of the Dulux paint maker does not engage in talks.

Pittsburgh-based PPG has sweetened its cash and share bid for Akzo Nobel by 8 per cent to €96.75 per share. The offer includes the payment of Akzo's dividend.

PPG's latest offer comprises €61.50 in cash, 0.357 shares of PPG common stock and dividends worth €7.78.

The offer is a premium of 50 per cent to Akzo Nobel's closing price of €64.42 on 8 March 2017, when PPG first tabled its bid.

PPG has also offered to pay a significant break-up fee in order to allay Akzo Nobel's regulatory concerns.

Akzo Nobel confirmed it had received a "third unsolicited proposal" from PPG and said in a statement, "The Board of Management and Supervisory Board of Akzo Nobel will carefully review and consider this proposal."

In a letter to the Akzo Nobel's board, PPG CEO, Michael McGarry said he was "extending this one last invitation" for Akzo Nobel to back its takeover approach.

"Despite your rejections, private and public, of our invitations to date, we are confident you will find that a combination of our two companies will be beneficial to your stakeholders - and more beneficial than the revised strategy that you recently announced in response to our proposals.

"Our revised proposal represents a second substantial increase in price along with significant and highly-specific commitments that we are confident AkzoNobel's stakeholders will find compelling," he added.

To appease Akzo Nobel's board, PPG has offered several sops, including not shifting any production from Europe to the US, maintaining the company's headquarters for the marine and protective coatings business, and the decorative coatings and speciality materials arm, in the UK and the Netherlands respectively.

After rejecting two offers, AkzoNobel last week announced that it would return €1.6 billion to shareholders in 2017 and create two separate companies by hiving off its Specialty Chemicals business  (See: AkzoNobel under pressure from investors to engage in takeover talks with PPG Industries) 

Activist investor Elliott Management, asset manager Columbia Threadneedle, Causeway Capital, Franklin Templeton, Henderson, Harris Associates and Southeastern Concentrated Value, all holding minority stakes in AkzoNobel, had urged the company to start a dialogue with PPG.

Elliott Management said in a staement, "Elliott continues to believe that it is in the interest of all stakeholders for AkzoNobel's boards to accept PPG's invitation to enter into sincere and constructive discussions about a potential combination with PPG."

"Elliott further notes that PPG has characterised its proposal as a 'last invitation'. We understand from this that PPG will make no further attempts to engage in friendly discussions.

Formed in 1994 through the merger of Akzo NV of the Netherlands and Nobel Industries of Sweden, AkzoNobel is a leading coatings company whose key products include automotive coatings, specialised equipment for the car repair and transportation market and marine coatings.

AkzoNobel operates in over 80 countries, and employs approximately 46,000 people.

Its brands include Dulux, Bruguer, Tintas Coral, Hammerite, Herbol, Sico, Sikkens, International, Interpon, Casco, and Pinotex among others.

AkzoNobel is the world's second-biggest paint company with a market cap of about $17 billion and annual revenues of around $16 billion.