Bloomberg

May 11, 2017

There’s a 75% Chance PPG Walks Away From Akzo Nobel: Survey

Source: Bloomberg Terminal NSN OPSDO66K50XT <GO>

By William Canny

(Bloomberg) -- There is a ~75% chance of PPG walking away from its attempt to buy Dutch peer Akzo Nobel, according to a Bloomberg survey.

  • Of 24 M&A/event driven desks, analysts, fund managers and brokers surveyed, 18 said PPG would walk away from its current attempt to buy Akzo, 6 said that PPG would not

  • PPG CEO Michael McGarry had said April 24 that he planned to make a hostile bid if PPG’s most recent offer was spurned. Akzo has now rejected three approaches from PPG 

    • However yesterday, PPG said it was considering whether to drop its pursuit of Akzo, suggesting for the first time that it may end its attempts at a takeover

  • June 1 is deadline under Dutch law for PPG to make a tender offer to Akzo shareholders

  • Akzo shares gain 0.5%, PPG closed unchanged yesterday at $107.85

ANALYST QUOTES:

  • Louis Capital risk-arbitrage analyst Ben Kelly says PPG tends to be extremely disciplined 

    • Says they have made a decent offer, paying up again would just be bidding against themselves and there doesn’t seem to be any upside to that

    • Says the most prudent option would be to walk away; they could then come back when the chemicals business has been split out

  • North Square Blue Oak analyst Mario Russo says PPG’s latest offer represents fastest way to unlock value for Akzo shareholders 

    • The alternative is to wait for the spin-off of the specialty chemicals business to happen, and for the market to recognize its value, which could take up to 2 years

    • Akzo’s largest shareholders will want the chance to monetize their investment by accepting PPG’s offer

    • Adds that sector consolidation is only a matter of time, Akzo’s coatings business is mature, last five years of sales’ compound annual growth rate is unchanged whereas margins have improved

RELATED

  • May 11: Dutch Investor Group VEB Urges Akzo to Enter Talks With PPG

  • May 10: Akzo Investors Beware: Dutch Hostile Deals Have Low Success Rate

For Related News and Information:

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--With assistance from Gaurav Panchal.

 

To contact the reporter on this story:

William Canny in London at wcanny3@bloomberg.net

To contact the editor responsible for this story:

Celeste Perri at cperri@bloomberg.net