Axalta-Akzo Nobel Merger Talks Ends As Nippon Paint Makes A Premium Proposal For Acquiring Axalta

Talks about a possible merger between Axalta and Dutch peer Akzo Nobel came to an end after an all-cash offer was made to acquire U.S. coatings company Axalta Coating Systems Ltd by Nippon Paint Holdings Co Ltd.

While confirming the news, Nippon Paint termed it as “a proposal” to Axalta.’

Talks of a merger between Axalta and Akzo Nobel came to an end because they could not come to an agreement in the a “merger of equals”, the companies announced the very same day that Nippon Paints presented its proposal.

While not disclosing any role, if any, of Nippon Paints, the closure of the negotiations, Axalta said that it would continue to look for other “value-creating alternatives”. Warren Buffett’s Berkshire Hathaway Inc, Warren Buffett’s Berkshire Hathaway Inc, is the largest shareholder in Axalta.

Sources reportedly said that a premium over the closing price of Axalta of Monday was made in the all-cash offer by Nippon Paint, the biggest paint supplier of Japan. The ending share of Axalta shares was $32.54. the sources also said that closing negotiations with Akzo Nobel was based om the size of the offer.

The market cap of Nippon Paint is 1.2 trillion yen ($10.7 billion) while that of Axalta is $8.2 billion.

Trading of Nippon Paint shares was stopped following news of the offer but not before the shares had dropped 4.5 percent on Wednesday morning. The Osaka-based company intends to become a “global paint major” and has expressed its desire to begin operations in the United States and Europe.

Earlier in the year, Akzo Nobel preferred to stick to a standalone plan and rejected a takeover offer from PPG Industries Inc of 26 billion euro ($30.5 billion). the year has been particularly difficult for the company and the failed talks with Axalta highlighted that.

However Dutch takeover rules allow PPG to return as early as next month with a new offer. But after three offers were rejected by Akzo Nobel in March and April, the company is no longer interested in putting forward any fresh offers, PPG CEO Michael McGarry has indicated.

The specialty chemicals division of Akzo carries an estimated value of up to 10 billion euros and the company has expressed its intentions of following the strategy of either selling or looking for a stock listing, the company said in a statement.

The “vast majority of proceeds to shareholders” has been promised by Akzo Nobel.

While Chairman Antony Burgmans is of Axalta is due to retire in April, former Akzo Nobel CEO Ton Buechner and former CFO Maëlys Castella have resigned have resigned since PPG talks broke down in June.

The strategy that Akzo Nobel had developed under Buechner and Burgmansv is what the company would remained focused on, the cocmpany’s new CEO, Thierry Vanlancker, said in a statement on Tuesday.

SMBC Nikko Securities analyst Shinobu Takeuchi wrote in a note to clients that earnings for Nippon Paint would be boosted from automotive coatings and the U.S. market would open up for it if the Axalta deal goes through.

“However, we would focus on how the firm plans to execute an all-cash buyout, which would demand considerable capital,” the Tokyo-based analyst said.

(Adapted from Reuters)

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