Akzo wins court challenge from Elliott in takeover battle

The Commercial Court of the Netherlands ruled on May 29 that Akzo Nobel does not need to honour demands from shareholders for a vote on removing chairman Antony Burgmans.
The Commercial Court of the Netherlands ruled on May 29 that Akzo Nobel does not need to honour demands from shareholders for a vote on removing chairman Antony Burgmans.PHOTO: REUTERS

AMSTERDAM (BLOOMBERG) - Akzo Nobel successfully dodged a legal challenge from activist shareholder Elliott Management Corp. to oust Chairman Antony Burgmans, strengthening the Dutch paintmaker's hand in resisting takeover talks with a United States suitor.

The Commercial Court of the Netherlands ruled late Monday that Akzo Nobel is under no obligation to honour demands from shareholders led by the New York-based fund for a vote on removing Mr Burgmans. Judge Gijs Makkink said the company didn't have to involve investors in decisions regarding unwanted bids from PPG Industries Inc. and was within its rights to reject talks with the rival.

Akzo Nobel shares fell 2.2 per cent to 74.71 euros at 9:06 a.m. in Amsterdam, giving the company a market value of 19 billion euros (S$29 billion).

Elliott had petitioned the Amsterdam court to intervene in the nearly three-month-old takeover battle, alleging Mr Burgmans, 70, failed in his duties to investors in refusing meaningful talks and rebuffing three takeover offers by PPG, the latest worth about US$29.5 billion. The fund controlled by billionaire Paul Singer had asked the judge to force Akzo Nobel to allow a vote on Burgmans, a request that garnered support from shareholders holding about 13 per cent of the chemicals manufacturer.

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In his ruling, Judge Makkink said that while he didn't doubt Akzo Nobel's management, it and the company's board should find a way to normalize relations with shareholders and be more accountable to them on why PPG's offers were rejected. Elliott could appeal Judge Makkink's verdict to the Supreme Court.

"The ruling has reduced the likelihood of a combination with PPG, leaving only a hostile bid as the way going forward," said ING Bank analyst Stijn Demeester, adding that Akzo Nobel's anti-takeover defense mechanism would result in "significant risk" for PPG.

Akzo Nobel spokesman Leslie McGibbon said the company is "very pleased with the result of the court ruling."

Elliott is "surprised and disappointed" with the ruling and is considering the implications of the judgment for shareholder rights and for its next steps in relation to Akzo Nobel, a spokesperson said. PPG said in a separate statement it's reviewing the court decision.