Akzo Sets Plan to Dodge PPG Takeover -- WSJ
20 Abril 2017 - 4:02AM
Dow Jones News
By Christopher Alessi
LONDON -- Paint and chemicals giant Akzo Nobel NV on Wednesday
boosted dividend payouts to shareholders and set a timeline for the
separation of its specialty-chemicals division, the latest in the
Dutch firm's efforts to fend off a $24 billion takeover approach
from U.S. rival PPG Industries Inc.
Akzo said the unit's separation from its paints and coatings
operation would take place within the next 12 months. The company
plans to pursue a dual-track process to have the option to either
spin off the business as a separate listed entity or sell it
outright.
"We believe this plan creates superior value" to the PPG offer,
Akzo Chief Executive Ton Büchner said Wednesday. "It has
significantly less uncertainty."
Akzo announced last month that it planned to separate the
business, when it disclosed PPG's interest. Akzo has since rejected
a second, sweetened offer by PPG of EUR88.72 ($94.70) a share, up
from an initial bid of EUR83 a share.
Mr. Büchner said the "vast majority" of net proceeds from the
separation of the specialty chemicals business would be returned to
shareholders. Pretax proceeds of the separation could be roughly
EUR8 billion, according to analysts at Bernstein Bank.
The company said it is targeting increased shareholder returns
and plans to issue a EUR1 billion special dividend to shareholders
in November, as well as a 50% increase on the regular dividend, to
EUR2.5 a share.
Details of the new strategy come as Akzo is warding of an effort
by some of its largest investors, including activist investor
Elliott Management Corp., to push the Amsterdam-based company to
engage in negotiations with Pittsburgh-based PPG.
Elliott last week called for a special meeting of Akzo's
shareholders to try to oust the chairman of the supervisory board.
Akzo responded that it strongly supported Chairman Antony Burgmans
and would reject an agenda item seeking to dismiss him.
The company hasn't yet said whether it will agree to hold the
extraordinary meeting. At an investor event Wednesday, Mr. Büchner
declined to answer questions from an Elliott representative about
how Akzo could reject an agenda item before deciding on whether to
hold the extraordinary general meeting.
"The supervisory board has unanimously decided in favor of the
approach we are taking," Mr. Büchner said.
He used the investor event to outline in detail the strategy for
either spinning off the specialty chemicals unit or selling it.
Afterward, Mr. Büchner said there was an "initial positive
reaction" from investors he spoke with about the plan.
Speaking with the Journal, the CEO said that unlike PPG's
takeover proposal, his plan to separate the division and create
value for shareholders offers a "certainty of execution."
Elliot later in the day released a statement rejecting the
company's stand-alone strategy, questioning whether the Akzo's
board had "adequately discharged their duties."
"Patience and trust only extend so far, and Akzo Nobel is now
effectively asking shareholders to endorse managerial
self-entrenchment, " the statement said.
PPG is also sticking to its guns. "We've not heard anything
today that changes our belief in the value of combining the two
companies," the U.S. firm said.
Mr. Büchner has repeatedly refused to engage with PPG
management, calling the takeover offer inadequate.
PPG on Monday appealed directly to Akzo shareholders, employees
and customers in an open letter that highlighted the U.S. firm's
stronger stock-market performance, its sales growth and its
successful takeover record as reasons for negotiations to begin.
The letter argued that the combined company would be stronger than
two independent competitors.
Akzo on Wednesday also reported financial results for the first
quarter and outlined fresh guidance for the current year, saying it
expects earnings before interest and taxes to rise by roughly
EUR100 million in 2017. That compares with EBIT of EUR1.5 billion
last year.
The company said quarterly net profit stayed flat
year-over-year, at EUR240 million, even as EBIT climbed by 13% to
EUR376 million because of volume growth and cost discipline.
Quarterly revenue rose 7% to EUR3.67 billion, mainly as a result
of higher volumes and acquisitions.
Akzo Nobel, whose brands include Dulux and Sikkens, was created
from the merger of paint and chemicals companies in Sweden and the
Netherlands that dated back more than a century. Among them was a
chemicals firm founded by Alfred Nobel, who launched the prizes
that bear his name. After the merger in 1994, Akzo acquired two of
Britain's oldest paint and chemicals firms.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
April 20, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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