As per analysts, although the going is likely to be tough for Akzo, the company is under heightened pressure to deliver given its past behavior and performance.
On Monday, Akzo Nobel, the Dutch paints and coatings maker who came under increased investor pressure after rejecting a lucrative takeover offer from PPG Industries and then issuing two profit warnings, stated it was in acquisition talks with Axalta Coating Systems Ltd, a U.S. rival, with the aim of creating a combined company which will have a market capitalization of $30 billion.
Following heightened market speculation on a possible deal, Akzo said it was in “constructive talks” with Axalta; as a result Axalta’s shares surged by 17%.
Going by Friday’s closing price, Akzo has a market capitalization of $22.7 billion (19.5 billion euros), while Axalta’s is $8.1 billion, with a closing price of $33.15 per share.
According to Akzo, the merger makes sense since Axalta’s truck coatings business would fill a gap in its portfolio. In the company’s own words it would “create a leading global paints and coatings company.”
Earlier this year, Akzo had faced several lawsuits from angry shareholders stemming from its decision to reject a 26 billion euro takeover offer from U.S. rival PPG Industries.
As per Joost van Beek, an analyst at Theodoor Gilissen, while the timing of the Axalta deal is challenging, Akzo’s management is under pressure to pull it off.
“There is a large risk that Akzo will pay too much, as it is clear that they want to stay out of the hands of PPG, and Axalta knows that,” said van Beek.
As per multiple sources familiar with the matter at hand, the talks between the two are at an early stage and there was no guarantee of an agreement.