Elliott Loses Latest Legal Battle Against Dutch Paint Maker Akzo Nobel

By Ben Dummett Features Dow Jones Newswires

Elliott Management Corp. lost its latest legal challenge Thursday to remove Akzo Nobel NV's chairman, but the legal decision signaled that the New York hedge fund could pursue this effort at a later date.

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Last month, an Elliott-led group petitioned the Netherlands' Interim Relief Court to force the big Dutch paint maker to hold a shareholder vote on the dismissal of Antony Burgmans.

Elliott argued shareholders had lost confidence in Akzo's leadership after it rejected calls from Elliott and several other large shareholders for the company to hold such a vote and enter into sale talks over PPG Industries Inc.'s $27.6 billion takeover bid.

Mr. Burgmans's "views on shareholder democracy [are] archaic and wholly unacceptable in today's capital markets," Elliott said as partial reason for its legal action. The investor owns a 9.5% stake in Akzo, making it the company's largest shareholder.

The Dutch court ruled it couldn't force the vote on Mr. Burgmans dismissal because Akzo has already scheduled a shareholder meeting for Sept. 8 that will allow investors to hold the board accountable. Akzo scheduled that meeting last month to hold a vote on the appointment of its new chief executive, Thierry Vanlancker, to the company's board of management. Mr. Vanlancker, who had headed up Akzo's specialty-chemicals business, assumed the top job after former CEO Ton Buchner unexpectedly resigned for health reasons. Shareholders won't get to vote on Mr. Burgmans's dismissal at that meeting.

The court ruled that the Sept. 8 meeting "partially meets the wishes of shareholders" by giving investors the opportunity to challenge Akzo's governance practices and thus makes Elliott's request premature. But the court also indicated that the activist investor could seek Mr. Burgmans's dismissal after that meeting.

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"We are pleased the court recognized the rights of shareholders to hold [a shareholder meeting] and make use of a right to dismiss a member of the supervisory board, although we respectfully disagree with the notion that accountability is premature," an Elliott spokeswoman said. An Akzo spokesman couldn't immediately be reached for comment.

The latest legal decision comes after a lower Dutch court in May rejected Elliott's previous attempt to force Akzo to hold a vote on Mr. Burgmans's removal. That court ruled that Akzo had analyzed PPG's bids seriously and that the dismissal of the company's chairman is a matter of strategy, making it a decision for management and Akzo's supervisory board, not shareholders.

Pittsburgh-based PPG dropped its takeover bid in June after Akzo rejected as too low the initial offer in March and two subsequent sweetened bids. The company also argued a tie-up would face a complex and uncertain antitrust review. Akzo is betting that the planned spinoff of the chemicals business and a plan to boost dividend payouts would offer shareholders more value and greater certainty of completion.

Elliott countered that Akzo couldn't make that decision until first determining if the company could negotiate a better deal through negotiations with PPG.

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

(END) Dow Jones Newswires

August 10, 2017 14:03 ET (18:03 GMT)