raw material purchasing, improved sup-ply-chain management and optimizing of
distribution networks.
“A combination of PPG and
AkzoNobel would result in enhanced
financial growth prospects for the combined company in the coming years,
which will also accrue to the benefit of all
stakeholders of the combined business,”
Michael McGarry, PPG’s chairman and
chief executive, said in March.
In its rejections of a total of three
PPG offers, AkzoNobel argued that the
company was being undervalued while
it saw greater opportunities of accelerated growth and greater value creation in
pursuing its own new strategy based on a
splitting of its operations into two separate companies – one for coatings and the
other speciality chemicals.
Its senior management has been
able to exploit fears, especially in the
Netherlands, of loss of jobs and cuts
in research expenditure. AkzoNobel is
planning to spend €1 billion ($1.1 billion) on R&D in 2017-2020.
These worries and the loss of a leading
Dutch company to foreign control were
issues which helped give AkzoNobel
the support of the Netherlands government and politicians in its quest for
independence.
“It is key that leadership of major
Dutch multinationals stays within the
Netherlands,” said Henk Kamp, Dutch
economic affairs minister. “The country’s economic structure has a major interest in this being the case. It is a good
thing that those running AkzoNobel plan
There have been a growing number
of attempted takeovers across Europe
by foreign companies which have been
thwarted by political opposition.
“Politics is beginning to become an
important aspect of the business land-
scape in Europe,” explained Paul Hodges,
a chemicals consultant at International
eChem (IeC), London. “Acquisitions
whose benefits are seen to be predomi-
nantly financial are becoming more dif-
ficult to accomplish. We have come to
the end of a cycle in mergers and acqui-
sitions in which takeovers can be driven
purely by the interests of shareholders.”
Coatings companies and their brands
tend to have long established roots
which have enabled them to forge close
links with communities. AkzoNobel is
itself a creation of a series of mergers
and acquisitions, the biggest of which in
recent years was the takeover of the rem-
nants of the UK-based multinational ICI
with its Dulux paints brand. The origins
of parts of AkzoNobel can be traced
back to the 17th century.
“Companies like AkzoNobel have
been around a long time and have be-
come social as well as economic assets,”
said Hodges. “It is not surprising that
there has been fears about their sudden
disappearance in the present politically
charged environment.”
The advantages of having social ties
build up over decades is not so evident
among other companies in the broader
chemicals sector where there have been
a number of significant proposed merg-
ers announced over the last few months.
These include a merger between
Clariant of Switzerland and Huntsman
Corp. of the U.S. and another between
the two industrial gases producers
German-based Linde and Praxair of the
U.S., all of which are major raw materials
suppliers to coatings producers.
These are consolidation moves which
have raised little controversy. Nonetheless
it has increased worries among some
coatings producers, particularly SMEs,
about consolidation increasing the pric-
ing power of raw material suppliers.
Another important tool AkzoNobel
has in its fight against any takeover
bid is the powers of the AkzoNobel
Foundation or Stichting, whose members
are also members of the supervisory
board, headed by the company chairman
Antony Burgmans.
The Stichting, which also exists in
other leading Dutch companies, are
sole owners of the company’s priority shares. As a result they have more
voting power than the owners of
AkzoNobel’s common shares, which
are traded on the stock market, and
preferred shares. Priority share holders
effectively have the power to veto takeovers and even to reverse dismissals of
top managers by shareholders.
Elliott Management Corp, a U.S.-based hedge fund with, at the time, a
3. 25 percent shareholding in AkzoNobel,
tried unsuccessfully to persuade a
Dutch commercial court to order the
company to call an emergency general
meeting (EGM) of shareholders. The
fund planned to use the EGM to oust,
with the support of other shareholders,
Burgmans who has been a key figure in
AkzoNobel’s refusal to ‘engage’ or negotiate with PPG.
Even if Elliott had gained the support
of the court for the calling of an EGM to
sack Burgmans, the Stichting could have
reappointed him.
“The priority shares may be considered to constitute a form of anti-take-over measure,” AkzoNobel explained in
its latest annual report. The Stichting’s
right to make binding appointments to
the managements and supervisory boards
would be only used in “exceptional circumstance,” it added.
But these circumstances include situations where a public bid for the common shares of the company has been
announced, or has been made, the company stresses.
Analysts have been speculating that
PPG could bid again for AkzoNobel from
the beginning of next year under Dutch
law. But the Pittsburg company would
face the same formidable barriers as it
did with its first attempt. CW
“Acquisitions whose benefits are seen to be
predominantly financial are becoming more
difficult to accomplish.”
