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PPG Bumps Up Bid for Akzo Nobel to $28.8 Billion

PPG Industries, April 24, 2017

PPG Industries has increased its proposed offer to buy Akzo Nobel to 26.9 billion euros ($28.8 billion) in cash and shares, from around 24.6 billion euros. In the latest proposal, PPG Chairman and Chief Executive Officer Michael McGarry said, “We are extending this one last invitation to you and the AkzoNobel boards to reconsider your stance and to engage with us on creating extraordinary value and benefits for all of AkzoNobel’s stakeholders. Our revised proposal represents a second increase in price along with significant and highly-specific commitments that we are confident AkzoNobel’s stakeholders will find compelling. We stand ready to work with you expeditiously to complete a targeted due diligence review and to negotiate a definitive agreement for the combination.

Key Details of PPG’s Revised Proposal Include:

PPG would acquire all of AkzoNobel’s outstanding ordinary shares (including ordinary shares represented by American depositary shares) at a value of Eur 96.75 (cum dividend), consisting of Eur 61.50 in cash and 0.357 shares of common stock of PPG per outstanding ordinary share (or for each three American depositary shares). The total value of our proposal of Eur 96.75 per share is based on PPG’s closing stock price of $105.94 and the prevailing exchange rate ($1.0726/Euro) on April 21, 2017.

PPG’s revised proposal represents:

  • An increase of Eur 6.75, or 8%, over our prior proposal on March 22, 2017, and Eur 13.75, or 17%, over our original proposal on March 2, 2017;
  • A value for the total outstanding equity of AkzoNobel of approximately Eur 24.6 billion;
  • A premium of 50% over the unaffected closing price of AkzoNobel of Eur 64.42 on March 8, 2017;
  • A premium of 42% over the unaffected 12-month median broker target price per AkzoNobel share of Eur 68.00; and
  • A premium of 24% (cum dividend) over the closing price of AkzoNobel of Eur 78.20 on April 21, 2017, including the impact of AkzoNobel’s new standalone strategy, and 26% over the calculated ex dividend price as adjusted for the payment of the proposed 2016 final dividend and 2017 enhanced regular and special dividends outlined as part of the new standalone plan. (Please refer to Annex B within the revised proposal letter for further illustration of these premiums).

PPG believes its revised proposal is vastly superior to AkzoNobel’s new standalone plan, as articulated on April 19, 2017. As evidenced by the decline in AkzoNobel’s stock price since its investor update, the capital markets have not recognized any additional value from its new standalone plan, including the enhanced regular dividend and special dividend that AkzoNobel has proposed for 2017.

One of the more notable risks of AkzoNobel’s new standalone plan is that it creates two smaller, unproven standalone companies with uncertain market valuations and substantial risks for reaching its 2020 guidance, especially given many of the annual targets that AkzoNobel has identified have not been achieved previously. AkzoNobel’s standalone plan also will require substantial restructuring; potentially decreases free cash flow, putting future and accelerated growth plans of the demerged companies at risk; and could require a regulatory review that would extend the timeline and create uncertainty.

PPG believes the long-term value creation from a combination of the two companies will be significant for shareholders of both companies, including the benefits of annual synergies of at least $750 million, which PPG has estimated based on publicly available information.

PPG’s revised proposal offers a value to AkzoNobel’s shareholders that is well in excess of AkzoNobel’s ability or track record to create value on a standalone basis, including via its revised strategy, in the near future as well as in the medium and long term.

PPG is prepared to make significant commitments to AkzoNobel’s stakeholders, as set forth in the revised proposal letter, that provide greater value and certainty than AkzoNobel’s new standalone plan.



Click here to read the full article from PPG Industries.


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