AkzoNobel has approached Axalta about acquiring the latter company, according to a report in Reuters citing sources familiar with the matter.
A deal would create a coatings maker with $19 billion/year in sales, surpassing Sherwin-Williams as the world’s largest. The rumors come months after AkzoNobel successfully rebuffed a $29-billion hostile takeover bid from PPG Industries.
An AkzoNobel-Axalta transaction is “a plausible move, with attractive synergies and a good strategic fit, but the timing suggest the AkzoNobel board wants to block off any possibility of losing its independence,” says Laurence Alexander, an analyst with Jefferies (New York). According to Dutch law, PPG could make another bid for AkzoNobel in December. Acquiring Axalta would “significantly strengthen” AkzoNobel’s presence in automotive refinish coatings, as well as in industrial coatings, according to Alexander. “Discussions appear to be in an early stage,” he adds.
AkzoNobel CEO Thierry Vanlancker, who replaced Ton Buchner in July, ran DuPont’s Eurpoean performance coatings business between 2010 and 2012. DuPont’s performance coatings business became Axalta after private equity firm Carlyle Group (Washington, DC) acquired it in 2013. Carlyle considered selling Axalta to AkzoNobel prior to Axalta’s 2014 IPO, according to Reuters.
Last week, AkzoNobel cut its 2017 EBIT forecast, the second such cut in as many months. The company also shelved plans for an IPO for its chemicals business, but will likely sell it or spin it off to shareholders. Vanlancker, meanwhile, has attempted to repair relations with the company’s shareholders, many of whom supported a merger with PPG. AkzoNobel consulted with Elliott Advisors (New York), a key critic during the PPG battle, on upcoming nominations to its supervisory board. Elliott and AkzoNobel reached a standstill agreement on 21 August.
It is unclear whether PPG will resume its pursuit of AkzoNobel in December, and PPG executives have not directly addressed the issue. However, during PPG’s quarterly earnings call last week, chairman and CEO Michael McGarry told investors that “we have moved on” from the merger proposal. “We are happy with our acquisition pipeline,” McGarry added.
Shares in Axalta surged about 20% on the rumors, hitting 52-week highs before closing at $33.15/share today. Alexander says Axalta could fetch $39/share in a buyout offer. The company has about 244 million shares outstanding.
A spokesperson for Axalta declined to comment on the matter.
By Vincent Valk
Source: Chemical Week
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