Chris Hughes on Akzo’s Second Chance

Chris Hughes at Bloomberg Gadfly has some thoughts on Axalta:

Akzo Nobel NV boss Thierry Vanlancker has the chance of a second stab at a jumbo chemicals deal with U.S peer Axalta Coating Systems Ltd. He should grab it.

Axalta’s negotiating position has been weakened after it started talks with Japan’s Nippon Paint Holdings Co. Ltd. last month, having already entered into discussions with Akzo about a possible all-share merger. Maybe the U.S. company hoped to get an auction going. The snag is that Akzo withdrew, and a firm agreement with Nippon failed to materialize.


It would have been wiser for Axalta to get Akzo on the hook first before trying to extract something better from Nippon. Maybe Nippon will come back. For now, though, the Dutch company can play hardball.

The potential synergies of a combination are sizable. Analysts reckon these could be at least 250 million euros ($298 million) annually.


There remain two obstacles to a deal for Akzo. The first is relative valuation: Axalta shares trade at a steep premium to Akzo’s, so a nil-premium stock deal would see the Dutch group’s shareholders owning a smaller share of the pie than their profit contribution merited.


The second obstacle is trust. The recent shenanigans may make it hard to pursue talks in good faith. That in turn may make it more difficult to agree a role in the combined group for Axalta CEO Charlie Shaver. But this shouldn’t be a dealbreaker.

It won’t be easy for Vanlancker to strike a deal that leaves his shareholders in the money. But there’s a path to a transaction and he owes it to his investors to have another go.

Posted by on December 1st, 2017 at 11:27 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.