(June 3): Nippon Paint Holdings Co and Sherwin-Williams Co ended their effort to buy Akzo Nobel NV, leaving the Dutch paintmaker to proceed with its planned merger with US firm Axalta Coating Systems Ltd.
The decision follows Akzo Nobel’s rejection of two joint all-cash offers put forward by the firms, the companies said in a statement Wednesday. The most recent offer of €73 per share valued the maker of Dulux paints at €12.5 billion (U$14.5 billion or $18.61 billion), and involved plans to break up the business.
Akzo Nobel shares plunged as much as 22%, the largest one-day drop on record, and traded at €53.76 at 10.31am in Amsterdam. The stock erased the gains made after the company last week revealed the rebuffed offers.
Akzo Nobel cited the difficulty of getting regulator approval for the Nippon proposal, and the board said the firm’s agreement to merge with Axalta, announced in November, was superior. Akzo Nobel confirmed on Wednesday that its board still unanimously recommends the Axalta merger.
The Axalta deal will create a paintmaker with an estimated enterprise value of about US$25 billion ($32.06 billion). Under the terms of the offer, Akzo Nobel would own 55% of the combined entity and move its share listing to New York, after trading for some three decades in Amsterdam. The deal still requires regulatory approval from the Federal Trade Commission, which has requested further information from both firms, according to a May filing.
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Global paintmakers are grappling with sluggish demand in their end markets and rising raw material prices because of the conflict in the Middle East. Akzo Nobel recently raised prices to offset the higher costs of materials including titanium oxide, used for colour pigments. The Dutch firm has been overhauling its strategy in recent years, closing sites and shedding thousands of jobs.
Paintmakers have long been involved in competing efforts to consolidate. In 2017, Nippon Paint derailed merger talks between Axalta and Akzo Nobel, before itself failing to reach an agreement to buy Axalta. Akzo Nobel also rebuffed an unsolicited US$29 billion buyout offer from rival PPG Industries the same year.
Activist investor Cevian Capital recently built a roughly 10% stake in Akzo Nobel, and has thrown its support behind the proposed merger with Axalta. Cevian Partner Robert Schuchna sits on the board that unanimously rejected the proposal from Nippon and Sherwin-Williams.
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