Business / Corporate

Nippon Paint derails Akzo bid for Axalta in surprise counter-offer

Bloomberg

Nippon Paint Holdings Co. made a surprise counter-bid for former DuPont unit Axalta Coating Systems Ltd., derailing amicable merger talks between the U.S. company and paint maker Akzo Nobel NV as the Japanese firm attempts its biggest acquisition.

There’s no guarantee a deal will be reached, Nippon Paint said in a stock exchange statement Wednesday without disclosing the financial terms of its offer. Axalta, whose shares gained to their highest level in more than two years in New York trading Tuesday, confirmed the bid. The Philadelphia-based company had a market value of $8.25 billion (about ¥924 billion) while Nippon Paint has a market capitalization of $10.3 billion.

Axalta has posted profit declines for two straight quarters amid rising costs for paint ingredients. The company’s biggest shareholder is Warren Buffett’s Berkshire Hathaway Inc. Founded in 1881, Nippon Paint is the largest paint maker in Asia, according to its website.

Nippon Paint has reported spending at least $1.3 billion buying other companies since 2006, including last December’s acquisition of U.S.-based Dunn-Edwards, according to data compiled by Bloomberg. In 2014, the Japanese paint-maker acquired several China-based ventures from Wuthelam Holdings Ltd., turning them into affiliates.

Nippon Paint shares slumped 4.5 percent to ¥3,535 in Tokyo before trading was halted Wednesday. That’s the lowest level for the stock since February.

Osaka-based Nippon Paint reported net sales of ¥470.2 billion ($4.2 billion) for the year ended March 31, while Axalta’s revenue was $4.1 billion in the year through December 2016.

Japanese companies have announced $83.1 billion of overseas acquisitions this year, down from $91.6 billion during the same period last year, according to data compiled by Bloomberg.

Reuters reported earlier that Axalta received an all-cash offer from Nippon Paint.

The collapse of the Akzo Nobel-Axalta talks also marks the latest twist in a wave of dealmaking in the chemical industry. Akzo has come under shareholder pressure this year after rebuffing an unsolicited $29 billion buyout offer from rival PPG Industries Inc. and battling activist investor Elliott Management Corp.

Adding to the squeeze, Akzo Nobel has seen U.S. rival Sherwin-Williams Co. acquire local competitor Valspar Corp. A merger with Axalta would have been a deterrent should PPG still hold ambitions for a takeover at a later stage.

In a separate release, Akzo said it remained focused on separating its specialty chemical business and meeting its 2020 financial targets.

PPG can renew its bid for Amsterdam-based Akzo on Dec. 1 under Dutch takeover rules. Akzo, which is planning to separate its chemical division to focus on coatings, would have bulked up with an Axalta combination in a potential deterrent to a renewed approach by PPG. Akzo’s former suitor has said it has no interest in making another offer.

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