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Axalta Ends Talks with Akzo, Begins with Nippon

Monday, November 27, 2017

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Axalta Coating Systems (Philadelphia) released two statements less than a day apart last week, announcing that it not only ended merger talks with coatings giant AkzoNobel (Amsterdam), but it is now engaged in talks with Osaka, Japan-based Nippon Holdings Co. Ltd.

Talks End with AkzoNobel

Tuesday afternoon (Nov. 21) both AkzoNobel and Axalta released statements indicating that their merger talks had ended, with just minimal statements from each company.

The announcement from each company noted that the merger-of-equals talk was confirmed in October as a response to market speculation. The potential merger would have involved Axalta merging with AkzoNobel’s Paints and Coatings business, with financial terms undisclosed.

Axalta

Axalta Coating Systems released two statements less than a day apart last week, announcing that it not only ended a merging of equals talk with coatings giant AkzoNobel, but it is now engaged in talks with Osaka, Japan-based Nippon Holdings Co. Ltd.

AkzoNobel noted that it is currently focusing on the separation of its Specialty Chemicals business, which is slated to be formally voted on this week.

“I am confident that our strategy offers significant value for shareholders and other stakeholders in the short, medium and long term,” said CEO Thierry Vanlancker. “We remain focused on our strategic options to continue to develop our business and improve profitability in the future.”

At the end of the day Tuesday, Axalta said that the companies were unable to “reach mutually agreeable terms” and that it “continues to pursue other value-creating alternatives.”

“After pursuing a potential combination of Axalta and Akzo, we concluded we could not negotiate a transaction on terms that meet our criteria,” said Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer. “Any transaction we ultimately agree to needs to generate superior long-term value for Axalta shareholders as compared to the continued execution of our strategic plan.”

Talks Begin with Nippon

Early Wednesday morning (Nov. 22), Axalta released another statement, announcing that it is now in talks with Nippon.

“Axalta today confirmed that it is engaged in discussions with Nippon Paint regarding a potential acquisition of Axalta,” the statement read. “Axalta will pursue such a transaction only if its Board of Directors determines that it is in the best interest of Axalta to do so. There can be no assurances that a definitive agreement between the parties will be reached or on what terms.”

Nippon did not release its own statement, but Reuters reported that “two people familiar with the matter” confirmed that the company made an all-cash offer to acquire Axalta.

Nippon confirmed the proposal with Reuters but did not disclose any other details.

Reuters reports that Axalta has a market capitalization of $8.2 billion while Nippon Paint has a market capitalization of 1.2 trillion yen ($10.7 billion).

About the Players

The conclusion of talks with Axalta marks the end of an eventful year for AkzoNobel, after rebuffing multiple merger offers from Pittsburgh-based coatings giant PPG.

AkzoNobel

AkzoNobel noted that it is currently focusing on the separation of its Specialty Chemicals business, which is slated to be formally voted on this week.

AkzoNobel management declined to negotiate during the highly public and at times contentious courtship, and the company’s refusal to engage with PPG led to a lawsuit brought by an activist hedge fund that became AkzoNobel’s largest shareholder during that period of time

At the time of PPG’s first offer, AkzoNobel presented an alternative plan to unlock revenues, involving the spinoff of its Specialty Chemicals business as a separate entity. In the subsequent months, the company underwent a series of management changes.

Former CEO Ton Büchner resigned in July, citing health reasons, and was replaced by Thierry Vanlancker. Chief Financial Officer Maëlys Castella took a leave of absence beginning in September, also citing health reasons, and is expected to return in a different role. Maarten de Vries was later named to the CFO role. Supervisory Board Chair Antony Burgmans, whom hedge fund Elliott Advisers sought to remove in the wake of the PPG situation, is in his final year in his position.

A deal with Nippon would cap a year of deals for Axalta, which landed at least five acquisitions in 2017 including:

  • U.K.-based Plascoat Systems Limited, a thermoplastic polyolefin coatings manufacturer;
  • California-based Ellis Paints, a manufacturer of industrial and auto refinish coatings;
  • Florida-based Century Industrial Coatings, a supplier of coatings for structural steel, oil and gas and other applications;
  • U.K.-based Spencer Coatings Group, which produces coatings for heavy-duty equipment, general industrial and oil and gas; and
  • The North American Wood Coatings unit of Valspar, which that company was required to divest as part of its larger acquisition by Sherwin-Williams.

Meanwhile, the deal would give Nippon another highly sought foothold in the American market, following its acquisition of Los Angeles-based paint maker Dunn-Edwards Corp.

That deal was announced in December 2016 and finalized in March, reportedly valued at $595 million.

   

Tagged categories: Acquisitions; AkzoNobel; Axalta; Business matters; Finance; Mergers; Nippon Paint; PPG

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