US-based hedge fund Elliott Advisors initiated legal action against AkzoNobel earlier this month after the company turned down a third takeover offer from PPG that valued the company at around €24.6bn. However, the Dutch court said the disagreement between the firm’s board of executives and some of its shareholders was a “problem that AkzoNobel cannot ignore” because the continuing “lack of confidence” between them was detrimental to the company’s performance.
In April, Elliott Advisors launched its request for an EGM to remove Antony Burgmans, which was rejected by AkzoNobel’s board on the grounds that it contravened Dutch law. The Dutch court linked the request for an EGM to remove Burgmans to Elliot Advisors’ preference for AkzoNobel to be acquired by PPG.
“It is obvious that the commencement of Burgmans’ dismissal is essentially not intended to call into question his individual performance, but is intended as a means of moving AkzoNobel into negotiations with PPG, aimed at a PPG acquisition,” said the court ruling. It concluded that AkzoNobel’s board and supervisory board should seek ways to “normalise” their relationship with those activist shareholders.
Commenting shortly after the verdict was announced, PPG demurred from offering any commitment to further action regarding the potential acquisition. “PPG remains willing to meet with AkzoNobel regarding a potential combination of the two companies, but without productive engagement, PPG will assess and decide whether or not to pursue an offer for AkzoNobel,” it said.
Analysts at Bernstein Research also noted how the Dutch Enterprise Chamber had agreed to continue assessing whether AkzoNobel had been sufficiently transparent with its own shareholders in its dealings with PPG.
“The request to remove the chairman of the supervisory board was aimed at changing the company’s strategy which shareholders don’t have a right to do,” said Bernstein. “The court will continue to assess whether it needs to call for an independent investigation into Akzo over whether the company has been sufficiently transparent with its shareholders about the process it took when rejecting the PPG proposals.”
The analysts also highlighted how 1 June has been set as the deadline for PPG to launch a bid to acquire AkzoNobel, although reportedly the US company has requested an extended deadline until 15 June.
According to a report by newswire Bloomberg cited by Bernstein, if a formal proposal was approved by the Dutch regulator, PPG would have six working days to take the offer directly to shareholders or walk away for six months.