AkzoNobel is undertaking a review of strategic options for the separation of its Specialty Chemicals business.
The Specialty Chemicals business, which had revenues of €4.8 billion ($5.08 billion USD) in 2016, is strongly positioned with a broad portfolio of leading technologies and chemicals which service a wide range of end-user segments including construction, industrial and consumer goods. The separation will allow the Specialty Chemicals business to continue to build and accelerate its market-leading positions across a range of market segments.
As part of the separation, AkzoNobel will consider various alternative ownership structures for the Specialty Chemicals business including, but not limited to, the establishment of an independent listed entity. The ultimate structure will be determined by reference to shareholder value maximization as well as broader stakeholder considerations.
The decision was brought forward following confirmation that AkzoNobel has rejected an unsolicited, conditional proposal from PPG Industries Inc. for all of the issued and outstanding ordinary shares in the capital of AkzoNobel. The company says that PPG’s proposal substantially undervalues AkzoNobel and is not in the interest of its stakeholders, including its shareholders, customers and employees.
AkzoNobel confirmed it received an unsolicited, non-binding and conditional proposal from PPG for a public offer on all of the issued and outstanding ordinary shares in the capital of AkzoNobel at a price of €54.00 ($57 USD) in cash and 0.3 PPG shares per AkzoNobel share, corresponding to a value of €83.00 ($88 USD) per share as per Feb. 28, 2017.
“Our Specialty Chemicals business is an industry leader in many of the markets in which it operates and we are extremely proud of its heritage, performance and people,” said Ton Büchner, CEO, AkzoNobel. “We are reviewing strategic options to separate it from the company to create focus for both Specialty Chemicals and the Decorative Paints and Performance Coatings group, allowing them to build further on their respective leadership positions.
“As stated at our full-year results announcement in February, we are now a leaner, more agile company with a solid financial and operational foundation and a focus on growth. AkzoNobel has enjoyed a record performance in recent years in terms of profitability and has made significant strategic progress, allowing us to take this decision.
“Our decision today was brought forward due to recent events. The unsolicited proposal we received from PPG substantially undervalues our company and contains serious risks and uncertainties. The proposal is not in the interest of AkzoNobel’s stakeholders, including its shareholders, customers and employees, and we have unanimously rejected it. Along with my colleagues on our boards, our executive team and our thousands of employees, I firmly believe that AkzoNobel is best placed to unlock the value within our company ourselves.
“We understand our role in society and want to protect our ability to continue to invest in communities, research and development, innovation and sustainability in the countries in which we operate.”
AkzoNobel’s board of management and supervisory board say they have carefully reviewed and considered the proposal by PPG, together with their financial and legal advisers, taking into account the long-term interests of all AkzoNobel stakeholders, including the shareholders.
The boards unanimously concluded that the PPG proposal failed to reflect the long-term value creation potential of the company. The company says the boards also concluded that the equity component of the proposal has significant issues, including the high leverage of the proposed combination. They also believe the proposal carries significant delivery and timing risk for shareholders, both in relation to substantial anti-trust issues, pension schemes and the achievability of proposed synergies.
The board of management and the supervisory board say they also believe the proposal would be detrimental to the societies and economies in which AkzoNobel operates, including potentially jeopardizing the company’s major contribution to communities and research and development organizations globally and its deep commitment to sustainability.
“The proposal is not in the interests of AkzoNobel employees and would create potential uncertainty for thousands of jobs worldwide. …AkzoNobel did not initiate nor has it encouraged or entertained any conversations with PPG on this matter,” the company stated in a press release.