The Wall Street Journal reports that Akzo Nobel and its US rival Axalta Coating Systems are considering a possible merger to create a multibillion-dollar coating giant. A source said the talks are at an early stage and could collapse before a deal is reached.
The deal would involve Akzo Nobel spinning off its specialty chemicals business, as it plans to do now, and distributing proceeds to shareholders. A merger of two equals of the two companies would then give the new company added scale for better pricing for raw materials, streamlined operations and new clients.
The story also said that the structure involved in the merger would be critical in winning support from Akzo’s shareholders. Some have been concerned that the Amsterdam-based company would seek a major acquisition to protect itself from unwanted suitors.
One of its major shareholders, Elliott Management Corp, earlier this year attempted to force Akzo into sale talks with its rival PPG Industries Inc. The US$28bn takeover attempt failed.
Elliott and Akzo reached a truce over the Dutch company's alternative plan to separate its specialty-chemicals business and distribute the proceeds to shareholders. Some analysts estimate the specialty chemical business is worth up to US$10bn.
“Even with the spinoff of the specialty chemicals business, Akzo could face difficulty getting its shareholders to support an Axalta deal because the merger would make it more expensive than it otherwise would be for a potential suitor,” said the story.