AkzoNobel paints strategy to thwart US takeover bid

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THE HAGUE: The world’s leading paintmaker AkzoNobel Wednesday unveiled plans to shed its specialist chemicals division as it fends off a hostile US takeover bid, buoyed by stronger-than-expected first quarter profits.

“We will create two focused and high-performance businesses,” chief executive Ton Buchner said, valuing the chemicals division at between eight and 12 billion euros ($8.5 billion to $12.8 billion).

“Both businesses have skills and capabilities to stand on their own and to deliver a strong cash generation in the future.”

The Amsterdam-based group also reported net profit of 240 million euros ($257 million) in the period from January to March, relatively stable from a year earlier, but ahead of analysts’ expectations.

Sales of such household brand names as Dulux and Trimetal were up 7.0 percent to 3.7 billion euros, the company said in a statement. The move to spin off the chemicals division within 12 months either via a sale or a separate listing comes after AkzoNobel rejected two bids from US rival PPG last month — one which would have valued the whole company at 22.4 billion euros.

The bids did not reflect the company’s potential long-term value, and would “lead to uncertainty for the thousands of employees around the world,” AkzoNobel said at the time.

AkzoNobel’s paint-making business is seen as a broad barometer of underlying global economic activity. But the company has been under pressure in recent weeks amid the increasingly hostile bid by the Pittsburg-based paints and coatings business PPG.

Most of the profits from the spin-off of the chemicals will be returned to shareholders, Buchner vowed.

Some 1.6 billion euros will also be paid out to shareholders in 2017, which includes a special one-billion-euro dividend to be paid in November.

But the Dutch daily Volkskrant warned that “in order to make the chemicals division more attractive, AkzoNobel will whatever happens have to dismiss workers.”

The rejection of PPG’s offer led to shareholders last week calling for an extraordinary meeting to dismiss the chairman of the board, Antony Burgmans.

But AkzoNobel said the board still “strongly supports” Burgmans, adding his removal “would be irresponsible, disproportionate, damaging and not in the best interest of the company, its shareholders and other stakeholders.”
Fighting back, PPG sent an open letter to shareholders on Monday seeking to win them over, saying it had “a long and steadfast history of taking consistent strategic actions to grow our business”.

It said it invested “more annually in research and development than any other paint and coatings company”.

Chemicals for ‘soup to soap’

A merger between the two companies would prove “a unique and attractive opportunity for the future,” it argued.

Formed in 1994 in a merger between Akzo and Nobel, the group employs 46,000 people in 80 countries. It says it makes a range of products including “chemicals which are essential ingredients in everything from ice cream to asphalt, soup to soap, and plastics to paper”.

The tussle over the company comes just after another giant, the Anglo-Dutch Unilever, successfully fought off an unsolicited bid by the US food and consumer behemoth Kraft Heinz.

In a similar strategy to butter up shareholders, Unilever earlier this month said it would sell off its margarine division to spread the profits among investors.

AzkoNobel also said it plans to make 150 million euros in savings through improving efficiency, with another 50 million euros savings from the separation of the chemicals division.

The market appeared to have taken the moves in its stride Wednesday, with AkzoNobel shares on the Amsterdam AEX up slightly by 0.82 percent at midday to 78.96 euros.

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