What mysteries are hidden in the game between PPG and AkzoNobel?

In just two weeks, the game between PPG and AkzoNobel has been played several rounds, the chemical industry earthquake earthquake to the present, there is still a sound, officials can only wait to see its follow-up development.
March 2, 2017, PPG unilaterally invited AkzoNobel to discuss the creation of a potential merger. It is understood that PPG is proposing to buy AkzoNobel for 20.9 billion euros ($22.1 billion), with a value of 54.00 euros per share in cash plus 0.3 shares of PPG Industrial shares (equivalent to 83.00 euros per share on February 28, 2017, including 2016 dividends). But confident PPG was quickly "punched in the face".
March 9, 2017 - AkzoNobel says it has rejected an offer from
PPG, the world's largest U.S.
paint company, saying the bid "undervalues" the company to the detriment of shareholders.
10 March 2017, AkzoNobel issued a statement saying that it was in the process of splitting its specialty chemicals business, including, but not limited to, the creation of a separate publicly available entity.
to see here, everyone thought that the sensational takeover was coming to an end. Too young, too simple. How can the long-planned PPG give up lightly!
March 10, the Dutch financial daily reported that PPG was preparing a second offer for Akzo Nobel. PPG's first offer was rejected by AkzoNobel on the grounds that it was too low.
11, 2017 - Henderson Global Investments, one of AkzoNobel's shareholders, has called on the company's management to negotiate with PPG Industries, Reuters reported. This proves that AkzoNobel shareholders are willing to discuss the matter, the acquisition may have a turnaround.let's analyze how many icebergs are hidden under this wave of takeovers.
question one: Why does PPG like AkzoNobel?
this question starts with Xuanwei's acquisition of Westerberg. On March 20, 2016, U.S
s
, Xuan Wei, announced that it would pay $9.3 billion for peer-to-peer Wester. It follows three months of negotiations between Mr Xuan and Mr Westerber. After the cooperation case was finalized, Xuan Wei announced it. Since then, Xuan Wei held a partner meeting in Shanghai on May 3, 2016 with some of Wester's executives, as well as major distributors of China Resources home paint and furniture paint, in order to gain a better understanding of the situation in Westerberg and China Resources. On June 29, 2016, Westerberg announced that its shareholders had voted to adopt Xuanwei's proposed acquisition. Xuanwei and Westerberg said they hoped the deal would be completed by the end of the first quarter of 2017.
said the two companies have highly complementary products and that the merger will strengthen Xuanwei's global coatings and
paint
business and accelerate plans to expand into Asia Pacific, Europe, the Middle East and Africa. The purchase of Wesber will help Xuanwei product system in civil coatings and packaging coatings, coel coatings in the field of competitiveness.
the merger of Xuan Wei and Wudi Wesberg, who are the three brothers of global coatings, PPG's position as a global coating "one brother" is not guaranteed, PPG is panicking. The opportunity is here, according to Mike Harrison, an analyst at Seaport Global Holdings LLC, in a note to clients. Lower leverage provides a rating cushion for PPG acquisitions. To choose, PPG targeted the second brother AkzoNobel, feel that AkzoNobel all aspects of the most fit. Moreover, AkzoNobel and PPG have no major businesses other than decorative paint and are highly complementary to each other. To borrow the words of Michael McGarry, Chairman and CEO of PPG, "We believe that the combination of the two companies will provide exciting strategic opportunities that are in the best interests of both stakeholders and create unique growth opportunities based on the success of their respective businesses through strong alliances." Question
: What is the difference between Xuanwei's acquisition of Wesber and PPG's acquisition of AkzoNobel?
think there are three differences. First, after more than three months of negotiations with Wesber, Xuan Wei announced the acquisition with the approval of the other side. PPG, on the other hand, unilaterally issued an offer without discussing it with AkzoNobel, which caused AkzoNobel's disgust. AkzoNobel confirmed that PPG Industries made an unconsolided, non-binding and preconditional offer for AkzoNobel's full equity disclosure. And, on this issue, Akzonobel also said that there was no dialogue with the PPG, nor proposed, or accepted any dialogue. PPG's approach, in contrast to Xuanwei's friendly takeover, gives it the appearance of a hostile takeover.
, Xuan Wei's offer of $9.3bn was unanimously approved by both boards. PPG's proposed $22.1bn bid was rejected by AkzoNobel. AkzoNobel said publicly that the bid "underestimated" the company and failed to reflect the company's long-term value-creating potential, to the detriment of shareholders' rights. At the same time, because of the substantive anti-monopoly issues, pension plans and synergies of the realization of the reasons, will pose a greater risk to AkzoNobel. PPG and AkzoNobel did not agree on a bid price, compared with Xuanwei and Wesberg.
addition to this, there is one of the biggest differences between the two acquisitions. Xuanwei's acquisition of Westerbo is from the United States and is a domestic merger. While PPG is an American company, AkzoNobel belongs to the Netherlands and belongs to the category of cross-border mergers and acquisitions. Compared with domestic mergers and acquisitions, cross-border mergers and acquisitions are obviously more hindered, cultural differences, political barriers, etc. are difficulties to face. In 2014, Mr. Xuan bid for Comex, Mexico's largest paint company, before buying Wester, but rejected the deal with the intervention of Mexican regulators. It was later restarted after CEO John Morikis took office, buying Wester.
question three: Why did PPG's acquisition of AkzoNobel fail?
in addition to the above-mentioned PPG's unfriendly acquisition methods, the offer is too low, the risk is greater three reasons, there are four reasons.
first is political risk and protectionism in the Netherlands, where general elections are held on March 15th, after rising nationalism in the country. At the same time, the Netherlands is increasingly wary of takeovers of domestic companies.
reason for this is that it will do a lot of damage to the future chemical development of the Netherlands. Economy Minister Henkkamp said AkzoNobel was a pillar of the Dutch economy and should therefore remain in the Netherlands, the Dutch daily Algemeen Dagblad reported on March 10. AkzoNobel employs 4,900 people in the Netherlands. The acquisition could cost between 1,000 and 2,000 jobs.
, the acquisition could lose much of the Dutch knowledge and research in the chemical field, as these could be transferred to new products and research and development in the United States. AkzoNobel invests 363 million euros a year in research and development, which is critical to innovation and sustainable development in dutch chemistry. Another spokesman said U.S. companies are less focused on research and development, they are more focused on cost savings, and Dutch companies are more focused on long-term growth. Based on these considerations, the Dutch authorities may also have prevented the acquisition.
third reason is that acquisitions may face significant competition problems in the US and Europe.
is the information revealed in an interview by Ton B?chner, chief executive of AkzoNobel AkzoNobel. Mr. Tang is shunning disruptive big deals that are changing its U.S. rivals, such as Xuanwei and Dow, to support routine developments and smaller operational changes. Faced with a series of major deals in the coatings and chemical industry, Mr. Tang said he preferred discipline, with AkzoNobel focusing on internal growth, efficiency measures, more new products in areas such as
water-based coatings
and more unique acquisitions. So, as can be seen from this interview, Don Boehner may not agree to PPG's acquisition.