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Akzo Nobel Rebuffs Raised $24 Billion PPG Takeover Approach -- 2nd Update

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03/22/2017 | 10:36am CET
By Ian Walker in London and Christopher Alessi in Frankfurt 

Dutch paint and chemicals firm Akzo Nobel NV on Wednesday said it had rejected a sweetened EUR22.37 billion ($24.19 billion) takeover proposal from rival PPG Industries Inc., digging in its heels in a trans-Atlantic standoff between the two industrial giants.

The Amsterdam-based company said PPG's revised offer worth EUR88.72 a share, which comes just weeks after its initial EUR83-a-share offer was rebuffed, undervalues the company and doesn't warrant engaging with its U.S. suitor.

The standoff comes amid a wave of consolidation in the chemicals industry, including a $120 billion merger of U.S. giants Dow Chemical Co. and DuPont Co., and Bayer AG's planned $57 billion takeover of Monsanto Co., as the industry contends with weak growth and overcapacity.

In its new proposal, PPG offered EUR56.22 in cash and 0.331 PPG shares for each Akzo share. Its previous offer was EUR54 in cash and 0.3 PPG shares.

Akzo said a merger would lead to a large number of disposals because of overlaps in both geography and business lines, and would lead to significant job cuts.

The Dutch company, whose shares dropped more than 2% in early trading Wednesday, also cited a "culture gap" between the two firms.

"We are convinced that AkzoNobel is best placed to unlock the value within our company ourselves," Chief Executive Ton Büchner said.

Akzo, which counts Dulux, Sikkens, Interpon and Eka among its brands, is exploring the separation of its special-chemicals division in response to PPG's initial unsolicited offer.

Since then, it has emerged that activist investor Elliott Management Corp. owns a stake in Akzo and is pushing the company to engage with PPG, The Wall Street Journal has reported. Elliott has expressed concerns to Akzo management that it didn't engage with PPG and that it didn't consult the hedge fund, which owns less than 3% of Akzo -- the reporting threshold in the Netherlands.

PPG, whose brands include Pittsburgh Paints, Olympic and Glidden, said earlier this month that it continued to believe in the strategic rationale for the deal despite the initial rejection. It didn't immediately issue a response to the rejection of its second proposal.

The takeover tussle puts at odds two of the world's oldest industrial companies. Akzo Nobel 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.

PPG, founded in 1883 as Pittsburgh Plate Glass Co., was the first U.S. company to successfully market large sheets of glass, until then an expensive rarity. It quickly expanded into chemicals to secure a supply of raw materials and was an early supplier of the automotive and aviation industries.

Write to Ian Walker at ian.walker@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

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Financials ($)
Sales 2017 14 102 M
EBIT 2017 3 218 M
Net income 2017 1 921 M
Debt 2017 6 674 M
Yield 2017 1,91%
P/E ratio 2017 26,49
P/E ratio 2018 21,20
EV / Sales 2017 4,00x
EV / Sales 2018 3,81x
Capitalization 49 719 M
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Mean consensus OUTPERFORM
Number of Analysts 19
Average target price 123 $
Spread / Average Target 8,1%
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Hugh M. Grant Chairman & Chief Executive Officer
Brett D. Begemann President & Chief Operating Officer
Pierre C. Courduroux Chief Financial Officer & Senior Vice President
Robert T. Fraley Chief Technology Officer & Executive VP
Robert J. Stevens Lead Independent Director
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