AkzoNobel might split specialty, rejects PPG offer
The board of management and the supervisory board of AkzoNobel have unanimously concluded that the PPG proposal substantially undervalues AkzoNobel by failing to reflect the long-term value creation potential of the company.
AkzoNobel has announced on 9 March 2017 a review of strategic options for the separation of its specialty chemicals business.
The specialty chemicals business, which had revenues of US$5.12 billion in 2016, is strongly positioned with a broad portfolio of leading technologies and chemicals, which service a wide range of end-user segments, including construction, industrial and consumer goods. The separation will allow the specialty chemicals business to continue to build and accelerate its market-leading positions across a range of market segments.
As part of the separation, AkzoNobel will consider various alternative ownership structures for the specialty chemicals business, including, but not limited to, the establishment of an independent listed entity. The ultimate structure will be determined by reference to shareholder value maximisation as well as broader stakeholder considerations.
The decision was brought forward following confirmation that AkzoNobel has rejected an unsolicited, non-binding and conditional proposal from PPG Industries Inc for all of the issued and outstanding ordinary shares in the capital of AkzoNobel. According to AkzoNobel, PPG’s proposal substantially undervalues AkzoNobel and is not in the interest of its stakeholders, including its shareholders, customers and employees.
Ton Büchner, CEO, AkzoNobel, said: “Our specialty chemicals business is an industry leader in many of the markets in which it operates and we are extremely proud of its heritage, performance and people. We are reviewing strategic options to separate it from the company to create focus for both specialty chemicals and the decorative paints and performance coatings group, allowing them to build further on their respective leadership positions.”
“As stated at our full-year results announcement in February, we are now a leaner, more agile company with a solid financial and operational foundation and a focus on growth. AkzoNobel has enjoyed a record performance in recent years in terms of profitability and has made significant strategic progress, allowing us to take this decision,” revealed Büchner.
“Our decision today was brought forward due to recent events. The unsolicited proposal we received from PPG substantially undervalues our company and contains serious risks and uncertainties. The proposal is not in the interest of AkzoNobel’s stakeholders, including its shareholders, customers and employees, and we have unanimously rejected it. Along with my colleagues on our boards, our executive team and our thousands of employees, I firmly believe that AkzoNobel is best placed to unlock the value within our company ourselves,” observed Büchner.
“We understand our role in society and want to protect our ability to continue to invest in communities, research and development, innovation and sustainability in the countries in which we operate,” concluded Büchner.
AkzoNobel confirmed it received an unsolicited, non-binding and conditional proposal from PPG for a public offer on all of the issued and outstanding ordinary shares in the capital of AkzoNobel at a price of US$57.65 in cash and 0.3 PPG shares per AkzoNobel share, corresponding to a value of US$88.60 per share as per 28 February 2017 (cum final dividend 2016).
The board of management and the supervisory board of AkzoNobel have carefully reviewed and considered the proposal by PPG, together with their financial and legal advisors. In doing so, the boards have taken into account the long-term interests of all AkzoNobel stakeholders, including the shareholders.
The boards have unanimously concluded that the PPG proposal substantially undervalues AkzoNobel by failing to reflect the long-term value creation potential of the company. The boards have also concluded that the equity component of the proposal has significant issues, including the high leverage of the proposed combination. They also believe the proposal carries significant delivery and timing risk for shareholders, both in relation to substantial anti-trust issues, pension schemes and the achievability of proposed synergies.
The board of management and the supervisory board of AkzoNobel also believe the proposal is not in the interest of stakeholders, including its customers and employees. The proposal would be detrimental to the societies and economies in which AkzoNobel operates, including potentially jeopardising the company’s major contribution to communities and research and development organisations globally and its deep commitment to sustainability. The proposal is not in the interests of AkzoNobel employees and would create potential uncertainty for thousands of jobs worldwide.
AkzoNobel did not initiate nor has it encouraged or entertained any conversations with PPG on this matter.