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PPG drops quest for AkzoNobel; Valspar officially owned by Sherwin-Williams

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Announcements | Business Practices | International | Repair Operations

PPG announced Thursday that it was ending its pursuit of AkzoNobel, clinching Sherwin-Williams’ new title as “global leader in paints and coatings” after formally closing on Valspar that same day.

“We were hopeful throughout this process that AkzoNobel’s Boards would see the merits of our compelling proposal to combine our two great companies and create significant shareholder value and a more sustainable business for the future,” PPG CEO Michael McGarry said in a statement. “We strongly believe a combined company would create more opportunities and provide more benefits for our collective customers, employees, shareholders and society in general.

“We made a final attempt for engagement late last week and through a letter …  In that letter, we addressed AkzoNobel’s stated commentary around value, certainty, timing and stakeholder considerations, and provided additional and specific commitments and assurances including a significant break-fee and an offer to negotiate a nominal price increase as part of an agreed transaction. However, AkzoNobel’s Boards have consistently refused to engage and did not respond to our call or letter. As a result, we believe it is in the best interests of PPG and its shareholders to withdraw our proposal to AkzoNobel at this time.

“As always, PPG remains focused on identifying growth opportunities that will drive value and strengthen our company. We remain committed to our longstanding disciplined approach to business portfolio management and cash deployment.”

In contrast, Sherwin-Williams CEO John Morikis reveled in his new expanded company Thursday.

“We are pleased to complete this transaction, and I would like to officially welcome our new colleagues from Valspar and the tremendous talent they bring to Sherwin-Williams,” Morikis said in a statement. “The acquisition of Valspar accelerates Sherwin-Williams’ global growth strategy and creates the global leader in paints and coatings.  The combination of these two companies creates a world class brand portfolio, expanded product range, premier technology and innovation platforms and an extensive global footprint. These enhanced capabilities will benefit our customers and create sustainable long-term value for our shareholders.”

Sherwin-Williams-Valspar will be headquarted in Cleveland and employ about 60,000 people. Were the two companies combined earlier, they’d have brought in $15.8 billion worth of revenues in 2016.

Sherwin-Williams predicts it will save “$320 million of annual run-rate synergies in the areas of sourcing, SG&A and process and efficiency savings, within three years.”

We contacted Sherwin-Williams representatives Thursday for any information they can share on the impact upon Sherwin-Williams and Valspar’s auto body and auto paint shop clients.

However, it’s possible that few specifics will be available until Sherwin-Williams discusses its plans for the merged company on an earnings call July 20, 2017.

Sherwin-Williams bought Valspar for $11.3 billion, $113 a share. Valspar trading has halted, and its stock will be delisted.

PPG-AkzoNobel

PPG tried to buy AkzoNobel on friendly terms three times with unsolicited offers. It most recently offered about $28.8 billion, or about $103.77 a share for a 50 percent premium on AzkoNobel’s price before merger talks, and unsuccessfully offered Monday to sweeten the deal with other concessions.

“Despite the fact that your shareholders are strongly supportive of the price proposed in our previous offer, which would deliver a 50% premium to your undisturbed trading price, we are willing to discuss a further increase to obtain the support of the Supervisory Board and Management Board of AkzoNobel for an agreed deal,” McGarry wrote in a letter to AkzoNobel board Chairman Antony Burgmans. “Clearly a good faith engagement to both due diligence and confirmation of a joint work plan for the antitrust review process would enable us to offer the highest price.  Accordingly, we are only willing to discuss a nominal increase in price in the context of in-person negotiations in which all other non-price issues have been resolved.  Any adjustment in price would take into consideration the value of the non-price commitments that we have mutually agreed upon.  We would need clear evidence that you have authorized a team to seek an agreement on the combination of our companies.”

PPG on Monday offered a closing date of 15 months under a deal that gave the closure a year with two three-month extensions for regulatory issues. If the deal took longer than 15 months, PPG offered to pay AkzoNobel shareholders, a “ticking fee” of $0.11 per share monthly, or more than $28.3 million every month.

The Pittsburgh, Pa.-based PPG also offered a nearly $672.7 million “break-up fee” if the combined company didn’t clear antitrust regulators and a “management retention pool” of around $22.4 million to $56.06 million to preserve “only your top talent.”

McGarry sent the letter after Burgmans refused to take a “5 minute call” but said he would receive a written message, according to the PPG CEO.

In rebuffing PPG’s offers, AkzoNobel has told shareholders and a Dutch court it plans to spin off its Specialty Chemicals business in 2018 and “fully focus on its paint and coating activities.”

We asked AkzoNobel Thursday what this might mean for auto body and auto paint shops but have not yet received a response.

More information:

“PPG announces decision to withdraw proposal and not pursue offer for AkzoNobel”

PPG, June 1, 2017

“Sherwin-Williams Completes Acquisition Of Valspar, Creates The Global Leader In Paint And Coatings”

Sherwin-Williams via PR Newswire, June 1, 2017

Featured image: PPG announced Thursday that it was ending its pursuit of AkzoNobel, clinching Sherwin-Williams’ new title as “global leader in paints and coatings” after formally closing on Valspar that same day. (Sherwin-Williams/PRNewsfoto)