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AkzoNobel joins race to acquire Tikkurila with USD1.7-billion bid

January 19/2021

MOSCOW (MRC) -- AkzoNobel says that it has made a non-binding proposal to acquire Tikkurila for EUR31.25/share, valuing Tikkurila at about EUR1.4 billion (USD1.7 billion), reported Chemweek.

The company says that the offer represents a 113% premium compared with the volume-weighted average trading price of Tikkurila shares during the three-month period prior to 17 December 2020, when an initial offer to acquire Tikkurila was made by PPG Industries. It also notes that it is 13% higher than PPGs revised bid, made on 5 January 2021 - in response to a rival bid from Hempel (Lyngby, Denmark) as Tikkurila disclosed on 18 January. PPG launched its tender offer for Tikkurila on 14 January after it had been recommended by Tikkurila's board.

AkzoNobel, meanwhile, says it has agreed on key terms with Hempel for the sale of assets, including the decorative paints business of AkzoNobel in the Nordic and Baltic countries, to obtain merger clearance and ensure deal certainty for Tikkurila and its shareholders. The planned divestments would be completed after closing of AkzoNobel's proposed offer for Tikkurila, the company says. Thierry Vanlancker, CEO of AkzoNobel, declined to comment on the scale of divestments in an analysts' presentation held by AkzoNobel earlier today.

Our complementary geographic profiles would create superior value compared to any other combination, including growth opportunities for the company and its employees. Our collective procurement capabilities, expanded production, and combined sales and distribution channels would deliver substantial value creation, says Thierry Vanlancker, CEO of AkzoNobel.

The main offices and production facilities of Tikkurila in Finland would become the hub for the combined business in the Baltic region and substantial investment would be made in production facilities to supply future growth, AkzoNobel says.

The transaction is expected to be earnings per share (EPS) accretive in 2022, is aligned with the capital-allocation priorities of AkzoNobel, and would be financed using existing cash and credit lines, the company says. During the presentation today, Maarten De Vries, CFO at AkzoNobel, said that the company sees a mid-term return on investment (ROI) period of 3-5 years for the proposed deal. In addition, AkzoNobel will continue its EUR300-million share buyback program and maintains a target leverage ratio of 1-2 times net debt/EBITDA, the company says.

Vanlancker said during the analysts briefing that AkzoNobel had not made an offer to acquire Tikkurila earlier, because the company was not aware that Tikkurila was thinking of making a strategic change. PPGs offers triggered the companys decision to submit its own offer, since it sees Tikkurila as a perfect fit in its bolt-on acquisitions strategy and believes that AkzoNobel could create better value for Tikkurila, he added.

Vanlancker also said that there have been no talks with Tikkurilas shareholders and that AkzoNobel is waiting on Tikkurilas board to assess the offer. With this offer, AkzoNobel invites the board of directors of Tikkurila to enter into negotiations with a view to reaching agreement on a recommended voluntary public cash tender offer, the company says.

Tikkurila says that its board will consider AkzoNobels potential offer from the point of view of Tikkurila and its shareholders. It notes that AkzoNobels offer is non-binding and subject to several conditions, and there can be no certainty that this proposal will eventually lead to any agreement between AkzoNobel and Tikkurila.

The finalization of the potential is subject to customary conditions substantially similar to those included in the current tender offer document published by PPG on 14 January 2021, Tikkurila says. It requires reaching a 90% acceptance level and obtaining required regulatory approvals, and would not be conditional on financing, it says.

In addition, Tikkurila says that PPGs offer continues to be valid in accordance with its terms as set out in the tender offer document. Tikkurila's board may withdraw, modify or amend its recommendation for PPGs tender only if the board has complied with certain agreed procedures allowing PPG to negotiate with it and to amend the terms and conditions of its tender offer pursuant to the combination agreement, the company says.

AkzoNobel will continue to build on the growth momentum it has in the EMEA region and move on to other M&A targets it has in its pipeline, if the Tikkurila deal does not go through, Vanlancker said during the presentation. Analysts at Bernstein (London, UK) say that AkzoNobels chances of acquiring Tikkurila will depend largely on PPG's willingness to raise its offer further.

PPG engaged in a hostile effort to merge with AkzoNobel in 2017, supported by activist investor 40 North Management. The effort was stymied in part by Dutch securities law.

As MRC informed previously, in February 2020, PPG said it had completed its acquisition of Industria Chimica Reggiana (ICR, Reggio Emilia, Italy), a maker of automotive refinish products. Financial terms of the deal, including purchase price, were not disclosed. The deal was announced on 8 January. ICR was founded in 1961 and employs about 180 people. ICR manufactures automotive refinish products, including putties, primers, basecoats and clear coats. It also makes a range of coatings, enamels and primers for light commercial vehicles and other light industrial coatings applications. ICR employs about 180 people and sells its products in more than 70 countries in Europe, Africa, the Middle East, the US and Latin America.

We remind that Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% year on year, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-November 2020 output. November production of polymers in primary form rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1%  year on year.
Author:Margaret Volkova
Tags:Near East, Europe, propylene, ethylene, coatings, car components, paints and coatings, Akzo Nobel Functional Chemicals BV, PPG, Tikkurila, Russia, USA.
Category:General News
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