Coverage: PPG ups its bid for rival paint maker to $29 billion

PPG Industries Inc. upped its offer for rival paint maker Akzo Nobel NV to $28.8 billion on Monday and indicated it make become hostile if the Dutch company doesn’t begin negotiations.

Ellen Proper, Jack Kaskey and Ed Hammond of Bloomberg News had the news:

The latest bid provides sufficient time for Akzo to negotiate a merger agreement before June 1, which is the deadline under Dutch law for PPG to make a tender offer to shareholders, McGarry said. The U.S. company is looking for a deal that would combine the world’s two largest makers of paints and coatings amid a wave of chemical industry consolidation.

“Most people would regard that as a hostile move,” McGarry said. “It’s time to come to the table.”

Elliott Management Corp., the activist investor controlled by billionaire Paul Singer, has joined with other holders to call on Akzo Nobel to reconsider after the company rejected two earlier proposals.

“There can be no assurances that a hostile bid — if one were to materialize — would include the same or improved protections and undertakings for Akzo Nobel shareholders,” Elliott said in a statement Monday. “Elliott therefore believes that friendly discussions now are in the best interest of all stakeholders.”

McGarry said PPG would make the bid despite the prospect of being blocked by Akzo’s stichting, a legal structure common at Dutch companies that can be deployed to defend against takeovers. If the majority of shareholders support an acquisition, so would the stichting, he said.

Chad Bray of The New York Times reported that Dutch politicians are wary of American companies:

Akzo Nobel said on Monday that it would “carefully review and consider this proposal.”

PPG’s initial takeover bid was made as politicians and others in the Netherlands were expressing increasing concern about foreign buyers acquiring Dutch companies. Such takeovers became a prominent issue in elections in the country last month.

Akzo Nobel, based in Amsterdam, is one of the world’s largest makers of paints and coatings, employing 45,000 people in about 80 countries. It reported revenue of €14.2 billion last year.

Since the PPG approach last month, Akzo Nobel has focused on reviewing its plans as a stand-alone company, including bringing forward a potential spinoff of its specialty chemicals arm, which had €4.8 billion in revenue last year.

Toby Sterling of Reuters reported that Akzo will face unhappy shareholders at its annual meeting on Tuesday:

The move turns up the heat on Akzo ahead of its annual meeting on Tuesday where it will face a group of shareholders unhappy it has not engaged with PPG. Shares in Akzo, the maker of Dulux paint, jumped as much as 6 percent to a record high of 82.95 euros following the improved proposal.

The shareholders, led by hedge fund Elliott Advisors, say Akzo should at least open exploratory talks with Pittsburg-based PPG.

“I think it’s important for them to do the due diligence and to sit down and listen to us,” PPG Chief Executive Michael McGarry said in an interview. “They have run out of excuses to throw on the table to say why they shouldn’t.”

He said PPG believed the deal would add to its earnings from the first year and given the support from Akzo shareholders, the U.S. firm would submit a formal offer to the Dutch financial markets regulator by June 1, regardless of what Akzo does.

Akzo confirmed it had received a “third unsolicited proposal” from PPG but was non-committal in its response.

“The Board of Management and Supervisory Board of Akzo Nobel will carefully review and consider this proposal,” said Akzo, noting it was required by law to study the bid.