Akzo Nobel in merger talks with US rival Axalta

AMSTERDAM • Akzo Nobel is considering a merger with US rival Axalta Coating Systems in a bid to keep the embattled Dutch paintmaker independent and create a transatlantic speciality coatings giant.

The Amsterdam-based firm is "currently in constructive discussions" regarding a merger of equals with Axalta to create a leading global paints and coatings company, Akzo Nobel said in a statement yesterday. Axalta is the world's largest maker of auto refinish paints, with a market value of US$8.1 billion (S$11 billion).

A deal with Axalta would come separately from the Dutch firm's planned separation of its speciality chemicals business, including the return of the vast majority of net proceeds to shareholders.

Akzo Nobel said this remains on track for next April and is unaffected by the merger discussions.

Akzo Nobel is racing against the clock to ward off what could be another run on the company from United States competitor PPG Industries, which would be permitted to renew its takeover bid from Dec 1 under Dutch takeover rules. Akzo Nobel successfully rebuffed an unsolicited US$29 billion buyout offer this year, coming under intense shareholder pressure in the process.

A combination with Axalta would be sensible, Bernstein analysts including Mr Jeremy Redenius said in a note yesterday. The deal would combine the third-and fourth-ranked manufacturers in a relatively fragmented market. "We think Akzo shareholders would vote on a merger of equals," the analysts said, adding there could be some antitrust scrutiny into the effects of a deal in some industrial applications and in auto refinishings.

The Dutch paintmaker, which plans to separate its chemical division to tighten its focus on coatings, abandoned a target last month for this year's profit growth after third-quarter earnings missed estimates. It has also had a series of changes in top executives recently after losing its chief executive and chief finance officer due to health reasons.

Akzo Nobel is looking to pay close to no premium in any deal, a person familiar with the matter said over the weekend.

Axalta, of which Mr Warren Buffett's Berkshire Hathaway is the largest shareholder, soared 17 per cent in New York last Friday after Reuters first reported the talks, valuing the company at about US$8.1 billion.

The Dutch competitor, led by chief executive officer Thierry Vanlancker, has a market value of almost €20 billion (S$31.7 billion) after shares climbed 30 per cent this year.

Axalta, meanwhile, has posted two straight quarters of profit declines amid rising costs for paint ingredients.

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A version of this article appeared in the print edition of The Straits Times on October 31, 2017, with the headline 'Akzo Nobel in merger talks with US rival Axalta'. Print Edition | Subscribe