PPG (NYSE:PPG) today announced that it made a revised proposal on March 20, 2017 to acquire Akzo Nobel N.V. (AKZA.AS; AKZOY) for €90.00 (cum dividend)
per ordinary share, comprised of cash of €57.50 and 0.331 share of PPG common stock. This represents an increase of €7.00 per ordinary share from PPG’s initial offer. Including the assumption of net debt and minority interests, the proposed transaction is valued at approximately €24.5 billion, or $26.3 billion.
PPG was informed today that AkzoNobel rejected this latest proposal. To date, the Boards of AkzoNobel have not accepted PPG’s multiple invitations to discuss its proposals and negotiate a recommended transaction.
PPG believes this revised proposal strengthens a very attractive and highly compelling opportunity for both AkzoNobel and PPG, their respective shareholders and other stakeholders, and comprehensively addresses all relevant non-financial matters. PPG continues to believe strongly that a combination of the two companies presents a unique opportunity to build on the heritage and legacies of the respective businesses, and that the combination is in the best interest of both companies’ shareholders and other stakeholders.
Michael McGarry, Chairman and CEO of PPG, said, “We believe the revised proposal presents an opportunity for AkzoNobel’s shareholders to realize extraordinary value, by any measure, for their shares in AkzoNobel. It provides them with a premium valuation and the opportunity to receive substantial and immediate cash consideration and participate in the success of the enterprise through ownership of shares in the combined company.”
The €90.00 (cum dividend) per ordinary share proposal would provide a 40 percent premium to AkzoNobel shareholders based on AkzoNobel’s unaffected closing stock price of €64.42 on March 8, 2017, and is 39 percent above AkzoNobel’s 52-week high stock price prior to disclosure of PPG’s earlier proposal. The acquisition is expected to be immediately accretive to PPG’s earnings per share, excluding expected one-time transaction related costs, and value enhancing to PPG’s shareholders. PPG’s revised proposal provides a premium valuation for all of AkzoNobel as presently constituted, including the coatings businesses and the specialty chemical business.
PPG’s revised proposal reflects annual run rate synergies of at least $750 million, which could be achieved from a combination of the two companies. A substantial portion of these synergies relate to raw material purchasing, supply-chain management and optimizing distribution networks based upon PPG’s experience in acquiring AkzoNobel’s North American Decorative Coatings business.
“A combination of PPG and AkzoNobel would result in enhanced financial growth prospects for the combined company in the coming years, which will also accrue to the benefit of all stakeholders of the combined business,” McGarry said. “PPG has continued to carefully consider the interests of all AkzoNobel stakeholders, including shareholders, employees, customers and the communities it serves. We look forward to the opportunity to engage in dialogue with AkzoNobel leadership, members of its supervisory board and other stakeholders to further discuss the merits of this revised proposal, negotiate a transaction and work together towards an agreement on mutually acceptable terms. We are respectful of the questions and concerns that have been raised and look forward to addressing these in a collaborative manner.
“We are hopeful that AkzoNobel engages with us promptly in order to further discuss and explore the benefits of a combination for its stakeholders, including substantial commitments regarding employees in The Netherlands, research and development and sustainability.”
Terms of the Revised Proposal
PPG continues to believe that its initial proposal presented a unique and compelling value for AkzoNobel and its shareholders. Under its comprehensive revised proposal, PPG would acquire all of AkzoNobel’s outstanding ordinary shares (including ordinary shares represented by American depositary shares), at a value of €90.00 (cum dividend), consisting of €57.50 in cash and 0.331 share of common stock of PPG per outstanding ordinary share (or for each three American depositary shares). The total value of €90.00 is based on PPG’s closing stock price of $105.57 and the prevailing exchange rate ($1.074/Euro) on March 20, 2017.
PPG’s revised proposal represents:
• A value for the total outstanding equity of AkzoNobel of approximately €22.7 billion;
• A premium of 40 percent over the unaffected closing price of AkzoNobel of €64.42 on March 8, 2017;
• A premium of 39 percent over the 52-week high unaffected closing price of AkzoNobel of €64.81 on March 2, 2017;
• A premium of 45 percent over the volume weighted average price per AkzoNobel share of €62.07 over the three months ending March 8, 2017;
• A premium of 32 percent over the unaffected 12-month median broker target price per AkzoNobel share of €68.00; and
• An attractive implied EV/EBITDA multiple of 11.6x for 2016 (based on 2016 reported financials).
Strategic Rationale to Combine Companies
Strategically, the combination of AkzoNobel and PPG would create an enhanced global paints, coatings and specialty materials company, combining complementary products, technologies and geographies, and would:
• Create a stronger competitor in a highly competitive global marketplace, offering a broader line of products and technologies cost-effectively to a more diverse customer base;
• Establish an expanded portfolio of flagship technologies and brands, including combining PPG’s electrocoat, compact process, waterborne and light-weighting technologies with AkzoNobel’s advances in sustainable formulations and practices and its global Dulux, Sikkens and International Paint brands;
• Enhance the breadth and speed of research, development and delivery of new products with extensive geographic scope and technological reach;
• Create significant cross-selling opportunities along with a diversified combined sales force to drive incremental organic sales growth;
• Optimize our combined operational capabilities and footprint with world-class people and facilities;
• Be a complementary cultural fit and continue both companies’ longstanding commitment to being good employers and corporate citizens that operate in a sustainable and socially responsible manner. By adding PPG’s Sustainability focus and its COLORFUL COMMUNITIES™ projects together with AkzoNobel’s Planet Possible and Human Cities initiatives, the combined company can enhance the benefits to customers, the environment and the communities in which people live and operate; and
• Create a larger enterprise that will provide more personal growth opportunities for all our combined employees while enhancing our presence and importance in more communities around the world.