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PPG Confirms Rejection of Revised Offer by AkzoNobel

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PPG Industries (PPG - Free Report) said that it made a revised offer to Dutch paints maker, Akzo Nobel N.V. (AKZOY - Free Report) on Mar 20 to buy all of the latter’s outstanding ordinary shares for €90.00 (cum dividend) per ordinary share, consisting of €57.50 in cash and 0.331 share of PPG stock. The total value is based on PPG’s closing stock price of $105.57 on Mar 20.

The revised offer represents an increase of €7.00 per share from PPG’s initial bid worth €83 per share. The planned transaction is valued at around €24.5 billion ($26.3 billion) including the assumption of net debt and minority interests.

The latest offer would also provide a 40% premium to AkzoNobel shareholders based on its closing stock price of €64.42 on Mar 8. The revised proposal also reflects annual run rate synergies of at least $750 million that could be achieved through a combination of PPG and AkzoNobel.

However, PPG confirmed that AkzoNobel has rebuffed the revised proposal. The company also noted the AkzoNobel’s board has not accepted PPG’s multiple invitations to negotiate a recommended transaction till date.

AkzoNobel, on the other hand, said that the latest offer was not in the interest of its stakeholders and also fails to recognize the value of the company. It would also lead to a large number of substantial divestitures given the significant geographical and segment overlap of both companies and also result in significant job cuts, the company added.

Earlier, AkzoNobel confirmed the rejection of PPG’s initial offer on Mar 9, citing that it significantly undervalues AkzoNobel as it failed to reflect the long-term value creation potential of the company.

‎AkzoNobel also noted that it is reviewing strategic options for the separation of its specialty chemicals business. Separation of the specialty chemicals business, which had sales of €4.8 billion last year, will allow the business to continue to build and enhance its leading positions across a range of markets.

PPG Industries said yesterday that it continues to believe there is a significant strategic rationale for the proposed transaction and the combination is in the best interest of both companies’ shareholders.

The company noted that the combination represents a compelling strategic opportunity. It would create an enhanced global player in paints, coatings and specialty materials leveraging complementary products, technologies and geographies, offering a vast range of products to a more diverse client base.

PPG Industries, in 2013, closed the purchase of AkzoNobel’s North American architectural coatings business for $1.05 billion. The North American business, which markets the Glidden paint brand in the U.S., offered around 600 paint stores to PPG Industries. It also expanded the company’s scale in the North American architectural paint market.

PPG Industries has underperformed the Zacks categorized Chemicals-Diversified industry over a year. The company’s shares have lost around 4.5% over this period, compared with roughly 18% gain recorded by the industry.


PPG Industries is taking initiatives to expand its business through acquisitions. It is also taking certain restructuring measures to lower its cost structure globally. The restructuring actions are expected to deliver $120–$130 million in annual savings, with $40–$50 million of savings expected to be realized in 2017.

PPG Industries, however, is exposed to unfavorable currency exchange translation, especially in the emerging markets. The company also continues to face macroeconomic challenges.

PPG Industries currently carries a Zacks Rank #3 (Hold).

PPG Industries, Inc. Price and Consensus

 

PPG Industries, Inc. Price and Consensus | PPG Industries, Inc. Quote

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