The proposal not only fails to reflect the current and future value of AkzoNobel, it also neglects to address the significant uncertainties and risks for shareholders and other stakeholders.
The Management Board and Supervisory Board of AkzoNobel, together with their financial and legal advisors, have thoroughly reviewed the second proposal taking into consideration the interests of AkzoNobel's shareholders, customers, employees and other stakeholders.
The revised proposal represents a value of €88.72 (adjusted for final dividend) consisting of €56.22 (adjusted for final dividend) in cash and 0.331 PPG shares, as at 20 March 2017, per AkzoNobel share.
The proposal does not address the concerns expressed by the Boards in their initial rejection of 9 March 2017. The revised proposal:
1. Is not in the best interests of shareholders. It substantially undervalues AkzoNobel and fails to reflect the value creating opportunities of the new strategic direction and focus for both the Specialty Chemicals and the Paints and Coatings businesses, allowing them to build further on their respective leadership positions.
2. Contains significant risks related to the increased stock component and the high leverage of the proposed combined businesses.
3. Would result in a large number of substantial divestitures due to the major geographical and segment overlap of both companies across Decorative Paints and Performance Coatings, bringing into question value leakage. It does not address the significant risk and uncertainty, including timing, of deal completion due to extensive anti-trust concerns. These anti-trust issues would have a significant negative impact on employees and customers which will affect the integrity of AkzoNobel.
4. Will lead to significant job cuts. It includes synergies which can be expected to result in the restructuring of the combined employee base, leading to job losses. PPG provides no substantive commitments to employees, creating potential uncertainty for thousands of jobs worldwide.
5. Does not address fundamental stakeholder concerns and uncertainties, nor does it substantiate any tangible solutions in relation to, among others, R&D, pensions and employees.
6. Does not meaningfully address our concerns regarding community contribution and sustainability and the significant culture gap between both companies, including how any issues arising from this would be addressed.
The unsolicited proposal does not warrant AkzoNobel's engagement with PPG. The Boards unanimously reject PPG's revised proposal.
Ton Büchner, CEO, AkzoNobel:
"This proposal significantly fails to recognize the value of AkzoNobel. Our Boards do not believe it is in the best interest of AkzoNobel's stakeholders, including our shareholders, customers and employees. That is why we have rejected it unanimously.
"We are convinced that AkzoNobel is best placed to unlock the value within our company ourselves. We are executing our plan, including the creation of two focused businesses and new cost structure, and believe this gives us a strong platform for continued profitability and long term value creation for all our stakeholders with substantially less execution risks."
AkzoNobel will provide updated financial guidance and hold an upcoming investor event soon. Details of the event will be announced in due course.