PPG Industries dropped its pursuit of paint-making rival Akzo Nobel after the Dutch maker of chemicals and coatings refused to discuss last-ditch sweeteners to a $29.5bn offer.
PPG made a final effort in recent days to bring Akzo Nobel to the negotiating table, offering in a letter to nominally increase the price and pay a €600mn ($674mn) breakup fee if regulators rejected the deal, the Pittsburgh-based company said in a statement yesterday. PPG said it sent the letter on Monday to chairman Antony Burgmans because he had declined an e-mailed request for a 5-minute phone call.
“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.”
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 US 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. “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 said by phone. “It’s not a mega-surprise that PPG is withdrawing.”
In addition to the possibility of raising its offer, PPG said yesterday 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 US 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 €50mn towards retaining top management.
Going directly to shareholders was destined to be rocky. Since the start of 2000, only about 16% of hostile takeovers in the Netherlands have been completed, according to data  compiled by Bloomberg. The acquisition would have prevented Sherwin-Williams Co from grabbing PPG’s position as the world’s largest coatings maker with its pending $9.3bn purchase of Valspar Corp.
Akzo Nobel has held firm to its alternative plan to break into two companies focused on chemicals and coatings. The maker of Dulux paints cited “risks and uncertainties inherent in PPG’s proposal” as it rejected the takeover offer, concluding that its own strategy offered a “superior route to growth and long-term value creation.”
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.
Under Dutch takeover rules, PPG had to submit a firm offer for Akzo Nobel by yesterday or walk away for at least six months. The US company failed this week win an extension of that deadline.
Akzo shares fell 1.1% to €73.72 at 12:56pm in Amsterdam. PPG’s last offer valued the company at €96.75 a share in cash and stock.
PPG will continue to look for growth opportunities that will increase the company’s value, it said.
The deal is the second unsolicited bid for a Dutch company to fail this year in the face of resistance from the target. Kraft Heinz Co in February dropped an effort to buy Unilever for $143bn after the Anglo-Dutch consumer-products giant rebuffed the approach.