Akzo Nobel rejects Nippon Paint's offer to buy paint business

The management and supervisory boards of Akzo Nobel insist on their unanimous approval of the merger with Axalta, which is expected to create a paint manufacturer with a total market capitalization of around $25 billion. The offer from Japanese Nippon is viewed as another attempt to derail the planned deal with Axalta amid slowing demand and rising raw material costs in the global coatings industry.

Previous Deal Attempts

Nippon's attempt emerged about a month after Nippon and Sherwin-Williams Co. completed joint bidding for the entire Akzo Nobel company, but both all-cash offers were rejected. Akzo Nobel stated that the joint bid would face difficulties obtaining regulatory approval, and its existing merger agreement with Axalta Coating Systems Ltd., announced last November, remains more favorable.

According to sources close to the matter, Akzo Nobel management did not enter into negotiations with Nippon regarding the latest offer. Furthermore, information about this offer has not yet been provided to shareholders. It should be noted that Nippon's new proposal would involve a global integration of the Dulux brand and strengthen the companies' presence in Europe, as nearly two-thirds of the decorative paints division's revenue comes from this continent.

Details of the Axalta Merger

Akzo Nobel previously announced during a conference call that it was exploring the possibility of selling part of its decorative paints division in Southeast Asia. However, sources reported that Nippon is focused on acquiring the entire division and is unlikely to make an offer for only that part. Analysts at Jefferies noted that Nippon's offer could reignite the discussion about the value of individual Akzo Nobel assets, emphasizing that 'given the limited overlap between Deco Paints and Axalta, we continue to see minimal synergy potential from merging these businesses.'

Under the merger agreement with Axalta, Akzo Nobel will own 55% of the combined entity and will move the listing of its shares from Amsterdam to New York. Nevertheless, the deal still requires approval from the U.S. Federal Trade Commission, which, according to filings in May, requested additional information from both firms.