Akzo Nobel declines third takeover proposal from PPG

By Toby Sterling

AMSTERDAM (Reuters) - Dutch paint maker Akzo Nobel on Monday rejected a third takeover proposal from larger U.S. rival PPG Industries, valued at 26.9 billion euros ($29.51 billion), saying it undervalues the company, faces antitrust risks, and does not address other concerns such as "cultural differences."

A group of Akzo Nobel shareholders led by hedge fund Elliott Advisors who support a merger of the two companies has been pushing for talks, but Akzo said in a statement it would not engage in discussions with the U.S. company.

PPG must now decide whether it will move to a formal bid ahead of a June 1 deadline under Dutch securities laws without the support of Akzo's boards.

"The PPG proposal undervalues AkzoNobel, contains significant risks and uncertainties, makes no substantive commitments to stakeholders and demonstrates a lack of cultural understanding," CEO Ton Buechner said in a statement.

Reuters reported on Tuesday that Akzo was poised to reject PPG's latest offer made on April 24.

Buechner told reporters he and Akzo chairman Antony Burgmans met with PPG CEO Michael McGarry on Saturday, but would not give details of what was discussed, saying only that it was "cordial and respectful."

Buechner repeated that Akzo now intends to pursue the alternative plan it has developed to avoid a PPG takeover, which includes paying 1.6 billion euros in extra euros dividends to investors this year. It will also sell or float the company's chemicals business, representing about a third of sales and profits, within 12 months.

PPG's latest offer in cash and shares values Akzo's stock at around 96.75 euros per share. That's a 50 percent premium to where Akzo shares traded before PPG's interest became known on March 9.

Akzo's shares fell 3 percent to 77 euros per share in early trading. Morgan Stanley said in a note that "we think the shares are likely to fall to mid-70s this morning, as the market adjusts to a lower probability of a successful transaction. However, much will depend on PPG's response."

A PPG spokesman said the company intends to respond shortly.

Most analysts say Akzo's independence plan can not match a PPG takeover in terms of financial value. Akzo addressed less tangible "stakeholder" interests in more detail in its statement, saying said that PPG had not offered Akzo representatives sufficient representation on PPG's board to safeguard its interests after a potential acquisition.

It also said PPG's proposals on "employees, pensions, location of headquarters, R&D and sustainability - are limited, or describe existing contractual arrangements."

Elliott Advisors, which holds a 3.25 percent stake, had joined with other institutional investors representing more than a 10 percent stake to convene an extraordinary shareholders' meeting to debate the dismissal of Chairman Antony Burgmans over the company's refusal to enter talks.

Although such a request is allowed under Dutch law, Akzo refused, saying it would not be in the company's best interest. Elliott has said it may try convince a judge to order the meeting anyway, but even if that request were granted, the EGM would come after the June 1 deadline by which PPG must decide whether to launch a formal takeover bid that would be considered hostile by Akzo.

The company has protective measures against hostile bids adopted in 1926 but never tested, which include the right for a group of members of the supervisory board -- notably including Burgmans -- to make binding proposals for its management and supervisory board members.

The Dutch economic affairs minister has openly opposed an Akzo Nobel takeover amid rising nationalist sentiment in the Netherlands, and some of its Dutch employees are concerned that U.S. ownership would lead to job losses.

Elliot Advisors, which declined to comment on Monday, has argued that the job losses required by Akzo's independence plan would be four times greater than what it would be if PPG and Akzo were to combine.

($1 = 0.9115 euros)

(Reporting by Toby Sterling; Editing by Stephen Coates and Louise Heavens)