Sometimes there is nothing quite like the arrival of an unsolicited and unwelcome offer to boost management performance and therefore shareholder value. The recent experience of Akzo Nobel offers a near textbook example.
AkzoNobel, the dual UK/Netherlands-listed multinational conglomerate, received a letter containing such an offer in the spring. Dated 2 March 2017, it was sent by PPG Industries, a US-based multinational conglomerate, offering a total of €83 per share.
That compared with a market value of €64.81 on that day. In its reply, from supervisory board chairman Antony Burgmans and CEO Tom Büchner, AkzoNobel described the informal, unsolicited offer as highly conditional. It rejected it outright.
Conflict of interest?
Moreover, it added that it was highly surprised that PPG Industries had appointed Allen & Overy as counsel. The law firm, it pointed out, had advised its CEO recently on the terms of his employment and also acted as counsel to its UK pension trustee.
PPG Industries, advised by vampire squid Goldman Sachs, made two further approaches to AkzoNobel. On 20 March it upped the offer to €90. On 24 April it went even higher and offered €96.75. Both were rejected.
No one is suggesting that the AkzoNobel management were not already doing their best and working their hardest. But there is little doubt that if they were, then their best quickly became better and the hard work took on a new manifestation.
Unveiling a new strategy
In the wake of the unsolicited offer, AkzoNobel unveiled a new strategy to create two focused, high-performing businesses with sustainable growth plans within 12 months. The stated aim was to accelerate momentum and enhance profitability.
The new strategy will see the creation of two focussed, high-performing businesses: Paints and Coatings and Specialty Chemicals. The management says this will lead to a step change in value creation for shareholders and all stakeholders.
The next phase builds on a strong financial and operational foundation, they say. It will generate superior, faster and more certain value creation than the alternatives (PPG offer) and with substantially fewer risks, uncertainties and social costs.
Proceed to the next level
The creation of these two independent, high-performing businesses will take the company to the next level, they state. There will be a clear separation within 12 months, they pledge.