Elliott Takes Akzo Nobel to Court to Oust Chairman in PPG Bid Battle -- Update

By Ben Dummett Features Dow Jones Newswires

U.S. activist investor Elliott Management Corp. has asked a Dutch court to force Akzo Nobel NV to hold a special shareholder meeting seeking the removal of its chairman, its latest attempt to strong-arm the paint maker into sale talks with rival PPG Industries Inc.

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Elliott said Tuesday it filed a petition with the Dutch business court, known as the Enterprise Chamber. It wants shareholders to vote Antony Burgmans' dismissal, arguing Akzo's supervisory board chairman failed to "discharge his fiduciary and corporate governance duties" after the Amsterdam-based company Monday rejected PPG's latest, sweetened takeover offer of EUR24.6 billion ($27.1 billion) without first negotiating with the Pittsburgh-based paint maker over a possible deal.

Declining the latest offer, Akzo argued its stand-alone strategy to boost dividend payouts and spin off its specialty chemicals business and return the bulk of the proceeds to shareholders would generate better returns. Akzo said that decision was based on "considerable in-depth analysis" and came after Akzo Chief Executive Ton Büchner, and Mr. Burgmans met with PPG Chief Executive Michael McGarry in Rotterdam, the Netherlands, on Saturday.

But PPG said in a written statement that the meeting lasted less than 90 minutes and that Messrs. Büchner and Burgmans "stated up front that they did not have the intent nor the authority to negotiate."

Akzo defended itself saying that it has acted "to the highest standards of Dutch corporate governance" in considering each of PPG's proposals. "We do not see how the dismissal of the Supervisory Board Chairman is beneficial to the company, its shareholders or stakeholders in anyway," the company said in a statement.

Elliott is part of a group of several of Akzo's biggest shareholders together holding more than 10% of the shares who believe Akzo can't favor its stand-alone strategy over a takeover without first negotiating with PPG to determine if it can get a better deal for shareholders and other stakeholders through a sale.

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The lack of in-depth talks is an "arrogant dismissal of recognized principles of proper corporate governance," Elliott said in its statement Tuesday.

Elliott is appealing to the Dutch courts to require Akzo to hold the special shareholder meeting on the dismissal of Mr. Burgmans because Akzo, citing Dutch law, previously rejected the shareholder request for such a meeting.

Elliott wants the Enterprise Chamber to require Akzo to hold the special shareholder meeting on June 6, according to a person familiar with the matter.

Still, Elliott's efforts could fall short even if Akzo is required to hold the vote. That is because it is unclear if PPG will continue its pursuit. On Monday, PPG said that it is reviewing Akzo's latest rejection. But PPG previously said that it doesn't plan to raise its offer again suggesting the paint maker may have to take the riskier approach of launching a hostile bid.

Akzo's corporate structure could also make it difficult for either PPG or Elliott to appoint new directors. Akzo has a controlling foundation and its four directors, including Mr. Burgmans, Akzo's chairman, retain the exclusive rights to nominate replacement directors. Supporters of such a structure say it protects stakeholders in the company other than investors--for instance, workers.

Still some observers say PPG could still prevail if it pursues a hostile bid. A commitment to proceed with a tender offer could provide enough pressure for those board members to wave the white flag. Should they hold out, however, and PPG wins over shareholders in a tender offer, pressure would only mount.

Write to Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

May 09, 2017 06:59 ET (10:59 GMT)