Nippon Paint's all-cash offer ends Axalta-Akzo Nobel talks

Nippon Paint confirmed it has made "a proposal" to Axalta but declined to give details, saying there is no assurance a deal will be reached.
Nippon Paint confirmed it has made "a proposal" to Axalta but declined to give details, saying there is no assurance a deal will be reached.ST PHOTO: KEVIN LIM

Japanese firm's offer at premium to where Axalta shares ended on Monday: Source

NEW YORK • Nippon Paint Holdings made an all-cash offer on Tuesday to acquire US coatings company Axalta Coating Systems, two people familiar with the matter said, ending merger talks between Axalta and Dutch peer Akzo Nobel.

Nippon Paint confirmed it has made "a proposal" to Axalta but declined to give details, adding that there is no assurance the two will reach any agreement.

Axalta and Akzo Nobel said earlier on Tuesday that they had ended negotiations about a "merger of equals" because they were unable to reach terms.

Axalta, whose largest shareholder is Mr Warren Buffett's Berkshire Hathaway, said it continued to pursue other "value-creating alternatives" although it did not disclose Nippon Paint's role, if any, in the termination of the discussions.

Nippon Paint, Japan's biggest paint supplier and 39 per cent owned by Singapore-based investment company Wuthelam Holdings, made the all-cash offer at a premium to where Axalta shares ended on Monday at US$33.54, one of the sources said.

The offer was credible enough for Axalta to end negotiations with Akzo Nobel, the source added.

It was not clear how far the negotiations with Nippon Paint would progress, and Axalta could also choose to engage in deal talks with other interested parties, the second source said.

Axalta has a market capitalisation of US$8.2 billion (S$11.1 billion), while Nippon Paint has a market capitalisation of 1.2 trillion yen (S$14.5 billion).

Nippon Paint shares fell 4.5 per cent yesterday morning before trade was suspended in the wake of the Reuters report.

For Akzo Nobel, the breakdown in the talks with Axalta marks the end of a difficult year in which it rejected a €26 billion (S$41.3 billion) takeover offer from PPG Industries, in favour of a standalone plan.

Akzo Nobel said in a statement it would now continue to pursue that strategy of selling or seeking a stock market listing for its speciality chemicals division, which has an estimated value of up to €10 billion. It promised to return the "vast majority of proceeds to shareholders".

The failure of the talks comes days before Akzo Nobel's shareholders are to meet on Nov 30 to approve the demerger of its speciality chemicals arms.

Since PPG walked away in June, former Akzo Nobel chief executive officer Ton Buechner and former chief financial official Maelys Castella have resigned, citing health reasons, while chairman Antony Burgmans is due to retire in April.

For Nippon Paint, an Axalta deal would help it crack open the US market and boost earnings from automotive coatings, SMBC Nikko Securities analyst Shinobu Takeuchi wrote in a note yesterday.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 23, 2017, with the headline 'Nippon Paint's all-cash offer ends Axalta-Akzo Nobel talks'. Print Edition | Subscribe