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4-Traders Homepage  >  Equities  >  Euronext Amsterdam  >  Akzo Nobel    AKZA   NL0000009132

AKZO NOBEL (AKZA)

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Akzo Nobel : PPG dismisses Akzo Nobel defence, presses takeover case

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04/19/2017 | 04:33pm CEST
The sign of AkzoNobel is pictured at its headquarters in Amsterdam

Pittsburgh-based PPG Industries (>> PPG Industries, Inc.) dismissed proposals put forward by Dutch paintmaker Akzo Nobel (>> Akzo Nobel) on Wednesday to fend off its takeover bid and won support from activist hedge fund Elliott Advisors.

Pittsburgh-based PPG Industries (>> PPG Industries, Inc.) dismissed proposals put forward by Dutch paintmaker Akzo Nobel (>> Akzo Nobel) on Wednesday to fend off its takeover bid and won support from activist hedge fund Elliott Advisors.

Akzo, which owns the Dulux paint brand, had earlier fleshed out its alternative plan to separate its chemicals business and pay shareholders 1.6 billion euros (1.33 billion pounds)in extra dividends this year rather than accept a 24.6 billion euro takeover by its U.S. rival.

In response, PPG said its 90 euros per share takeover proposal would be better for shareholders, as well as employees and other stakeholders.

PPG said its proposal featured an "immediate cash payout far in excess of AkzoNobel's special dividend".

Investors and analysts have largely been sceptical of whether Akzo's alternative plan can rival PPG's proposed offer of 90 euros per share in terms of value. Akzo shares were little changed at 78.34 euros by 1425 GMT.

Putting its case to investors in London, Akzo said it would sell or list the chemicals business, which accounts for about a third of sales and profits, within 12 months. Analysts have valued the division at roughly worth 8 billion euros, based on its 2016 operating profit of 629 million euros.

"This strategy will create substantial value for shareholders with significantly less risks and uncertainties compared to alternatives," said Akzo Chief Executive Ton Buechner.

Buechner said that the company may use proceeds of the spin-off to fund acquisitions, but the "vast majority" would be returned directly to shareholders.

INVESTOR PRESSURE

Akzo has twice rejected takeover proposals from PPG, despite strong encouragement from many of its shareholders to engage in merger talks.

Elliott, which has a 3.25 percent stake in Akzo and has been critical of the company management, kept up the pressure.

Elliott said while it was pleased about the move to spin off the chemicals unit, it noted "with concern" a "questionable" statement from a Akzo Chairman Antony Burgmans that Akzo's plan would deliver more value than Elliott's.

"It seems to imply that management's 'proven track record' is positive, however, according to Akzo Nobel's own calculations, the company has ranked towards the bottom of its self-defined peer group in delivering shareholder returns," said Elliott.

While PPG has said it sees merger synergies of at least $750 million, Akzo said on Wednesday it would cut costs by 200 million euros in 2017, of which 50 million would result from the separation of chemicals.

The Dutch company, which employs around 46,000 people, declined comment on possible job losses resulting from its plans.

Buechner set a new target for Akzo's operating margin to improve to 15 percent by 2020 from 12 percent at present.

Buechner said the company's paints and coatings divisions will each grow at 4 percent annually on the strength of its global brands such as Dulux, one percentage point better than the market.

At the chemicals division, the company said it would increase operating profit, as measured by earnings before interest and taxes (EBIT), and before incidental costs, by 250 million euros by 2020 and another 200 million euros by 2022.

Akzo also on Wednesday reported better than expected first quarter earnings and forecast a 100 million euro increase in operating profit for the full year.

(Reporting by Toby Sterling; Editing by Susan Fenton/Keith Weir)

By Toby Sterling and Maiya Keidan

Stocks treated in this article : Akzo Nobel, PPG Industries, Inc.
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Financials (€)
Sales 2017 15 043 M
EBIT 2017 1 628 M
Net income 2017 1 008 M
Debt 2017 1 338 M
Yield 2017 2,44%
P/E ratio 2017 19,94
P/E ratio 2018 18,76
EV / Sales 2017 1,43x
EV / Sales 2018 1,37x
Capitalization 20 245 M
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Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 81,0 €
Spread / Average Target 0,90%
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Managers
NameTitle
Ton Büchner Chief Executive Officer
Antony Burgmans Chairman-Supervisory Board
Maëlys Castella Chief Financial Officer
Peggy Bertha Bruzelius Member-Supervisory Board
Louis R. Hughes Member-Supervisory Board
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Sector and Competitors
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THE VALSPAR CORP8.52%8 934
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