Akzo extends olive branch to shareholders after battles with suitor and activist investor

AkzoNobel is taking steps to repair relations with shareholders.
AkzoNobel is taking steps to repair relations with shareholders.PHOTO: REUTERS

AMSTERDAM (BLOOMBERG) - AkzoNobel, the Dutch paintmaker planning to split in two, is taking steps to repair relations with shareholders following a bruising battle with a US suitor and activist investor, and an overhaul of top management.

The company, which successfully rebuffed a US$29 billion (S$39.4 billion) takeover approach from rival PPG Industries, is creating a board committee for shareholder relations and vowed to meet more often with investors to "strengthen and maintain a constructive dialogue", according to a statement on Tuesday. The company also convened a meeting on Sept 8 to vote in its new chief executive officer, Mr Thierry Vanlancker, and explain its rejection of PPG's unwanted offer.

AkzoNobel shares fell 1.2 per cent to 74.38 euros (S$117.98) at 9.15am in Amsterdam, taking gains to 25 per cent so far this year and valuing the company at 19 billion euros.

AkzoNobel is emerging from a tumultuous few months that left relations with some investors in tatters. Activist hedge fund Elliott Management Corp led a call for talks with PPG on its takeover bid. Adding to the upheaval, former CEO Ton Buechner suddenly resigned last week for unspecified health reasons, leaving Mr Vanlancker, who joined the company only in 2016, to carry out the ambitious targets the company put forth as its defence against being sold.

In a sign of further change to come at the top, chairman Antony Burgmans announced he plans to retire in April. He has born the brunt of opposition from Elliott to the company's strategy, and the fund has taken legal steps to try to remove him. The company also said it appointed Mr Ruud Joosten as chief operating officer, while Mr Werner Fuhrmann will head the speciality chemicals unit it plans to spin off. Mr Burgmans said on Tuesday approval from shareholders would be sought at a later date for that transaction.

"What we're aiming at is that we have sufficient clarity we can give sufficient information that shareholders can judge what they are deciding on," Mr Burgmans said during a call with reporters. "To find this balance, we think we are in a position on Sept 8 to say exactly when we will ask that shareholder approval."

Elliott has maintained pressure on AkzoNobel since PPG walked away from its approach June 1. The hedge fund is making a second attempt in court on Thursday to oust Mr Burgmans and is pushing to shape the agenda of the shareholders' meeting. The company said on Tuesday investors will not be allowed to put items on the agenda.

In a court tussle earlier this year in which Elliott lost a first attempt to remove Mr Burgmans, a judge ordered the paintmaker to restore its relationship with shareholders.

AkzoNobel also reported earnings before interest and taxes decreased 6 per cent to 461 million euros, according to a separate statement. Analysts surveyed by Bloomberg predicted 500 million euros, on average.

"We remain focused on executing our new strategy and continue to expect Ebit for 2017 to be around 100 million euros higher than 2016," Mr Vanlancker said. "This assumes no further material changes in market and economic dynamics, including foreign currencies."

The maker of Dulux paint and Sikkens coatings promised in April to return 1.6 billion euros to shareholders this year, and set a target of 15 per cent return on sales by 2020 for its paint and coatings business, and a return of 16 per cent for speciality chemicals. AkzoNobel also promised to spin off the chemicals division by April, of which the "vast majority" of net proceeds would also be returned to investors.

"We have put Akzo in the rear-view mirror and we're looking forward to growing our business," PPG CEO Michael McGarry said on July 20 in response to an analyst's question on an earnings conference call. Akzo has not been in contact with PPG after its US rival walked away, Mr Burgmans said.