Axalta And Akzo End Talks On Merger -- WSJ
22 Novembro 2017 - 06:02AM
Dow Jones News
By Ben Dummett
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 22, 2017).
Akzo Nobel NV and U.S. rival Axalta Coating Systems said Tuesday
they abandoned talks to merge after failing to agree on terms for
the proposed tie-up.
The failure of the talks, which was earlier reported by The Wall
Street Journal, came after Japan's Nippon Paint Holdings Co. made a
cash bid for Axalta on Tuesday that prompted the Philadelphia-based
company to walk away from Akzo, according to a person familiar with
the matter.
It wasn't clear if Nippon's offer will lead to a deal, but its
efforts and those of Akzo to join forces with Axalta are part of a
broader consolidation trend in the chemicals industry as companies
seek avenues for growth and cost savings.
LyondellBasell Industries NV, for example, made a takeover
approach for Braskem SA that could value the Brazilian
petrochemical company at more than $10 billion and give the
Netherlands-based chemicals-and-polymer producer access to Latin
American markets, the Journal reported last month.
Through the Axalta deal, Akzo would have created a
multibillion-dollar paints-and-coatings giant. Industries ranging
from automotive to mining use coatings to prevent corrosion and
improve durability.
The combination of the two companies could have boosted profit
growth by lowering raw-material costs, eliminating overlapping
operations, expanding the combined entity's products and adding new
customers.
Now Akzo and Axalta face that challenge as separate companies at
a time of rising raw-material costs and sluggish demand. In the
third quarter, Amsterdam-based Akzo reported a 13% drop in adjusted
operating profit, hurt in part by the higher raw-material costs.
Meanwhile, Axalta posted a 20% drop in adjusted net income in the
same period, amid lower volumes in North America.
"We remain focused on our strategic options...to improve
profitability in the future," Thierry Vanlancker, Akzo's chief
executive, said in a statement.
Before initiating merger talks with Axalta, Akzo had in April
laid out a plan to boost earnings and its stock price to fend off a
$28 billion takeover attempt from U.S. rival PPG Industries Inc. A
key part of that plan called for Akzo to spin off its
specialty-chemicals business from its paints-and-coating operations
and distribute the majority of proceeds to shareholders. Akzo also
had targeted a boost in its return on annual sales to about 15% by
2020 from about 12% currently. Both plans remain in place, a person
familiar with the matter said.
Axalta's stock surged almost 17% to $33.15 in New York trading
when the merger discussions first leaked in late October. The
company's stock closed at $33.87 on Tuesday, giving it a market
value of about $8.23 billion. That surge suggests a negative market
response to the failed talks could put pressure on Axalta to find
an alternative partner.
Axalta signaled confidence in its outlook despite the breakdown
in talks, noting in a statement that it "continues to pursue other
value-creating alternatives." Its statement made no mention of the
Nippon offer.
Akzo's stock price has stayed relatively flat since knowledge of
the talks emerged. Its market value of about $23.05 billion is
already more than twice that of Axalta.
Still some analysts and investors have speculated that PPG
Industries may mount another bid for the Dutch company since Akzo
would be cheaper after spinning off the specialty-chemicals
business. Some analysts have estimated that business could be
valued at up to $10 billion.
PPG has publicly played down any interest in Akzo since
abandoning its offer this summer.
Akzo and Axalta's tie-up would have been a merger of equals and
Akzo's spinoff of the specialty-chemicals business was a condition
of the deal.
--Dana Cimilluca contributed to this article.
Write to Ben Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
November 22, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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