Exclusive - Akzo Nobel approaches Axalta about possible merger: sources

By Ludwig Burger and Greg Roumeliotis

FRANKFURT/NEW YORK (Reuters) - Dutch paints and coatings giant Akzo Nobel NV has approached U.S. rival Axalta Coating Systems Ltd to talk about a possible merger that would create a global coatings group, according to sources familiar with the matter.

Philadelphia-based Axalta is in the early stages of considering a deal and there is no certainty that the two companies will agree to a merger, one of the sources said on Friday.

The sources asked not to be identified because the negotiations are confidential.

Neither company immediately responded to requests for comment.

Shares in Axalta soared nearly 22 percent after the merger talks were revealed and were last up 18 percent at $33.27 in early afternoon trading, valuing the car-paint company at $8 billion. Akzo Nobel's shares had finished flat in Amsterdam, valuing it at 19.5 billion euros.

Earlier this year, the Dutch maker of Dulux rejected a 26 billion euro takeover offer from U.S. rival PPG Industries. Instead, the company plans to sell its Speciality Chemicals division, which represents about a third of sales and profits.

Such a sale will concentrate Akzo on coatings and a tie-up with Axalta, the No. 1 supplier to the North American heavy truck market, would round out its business to include vehicle coatings.

A tie-up with the former car paint unit of DuPont would be the first major strategic move by new AkzoNobel CEO Thierry Vanlancker, who took over when Ton Buechner resigned for health reasons in July.

Vanlancker has cut Buechner's profit goals, made in the heat of the takeover battle, twice in the space of six weeks, blaming disruption caused by hurricane Harvey, rising raw materials costs and "headwinds" at its marine coatings business.

Vanlancker has stuck to longer-term financial targets made by Buechner, including an operating profit (EBIT) margin of 15 percent by the year 2020. That margin is currently below 12 percent.

Private equity firm Carlyle, Axalta's former owners, considered selling the company to Akzo in 2014 after filing for its IPO, according to media reports at the time.

(Additional reporting by Pamela Barbaglia in London; Editing by Nick Zieminski)