Akzo Nobel didn’t want to be bought by a big U.S. rival, so now the Dutch-based paints and coatings maker is trying to swallow a smaller one.
Akzo, which has changed its CEO and has had to issue two profit warnings since rebuffing an advance from PPG Industries earlier this year, said Monday it’s in “constructive talks” to buy Philadelphia-based Axalta Coating Systems in a deal that would create a $30 billion company.
Akzo called it “a merger of equals,” but the Dutch company is nearly three times the size of Axalta, worth $23 billion compared to $8 billion for Axalta at the close of trading Friday. Axalta’s shares had risen 17% on Friday as reports of a deal started to leak.
Axalta, which employs around 13,300 people worldwide and had sales of $4.1 billion last year, used to be DuPont Performance Coatings. It was bought by the private equity group Carlyle in 2013 and then re-listed on the New York Stock Exchange under its new name a year later. Warren Buffett’s Berkshire Hathaway bought a stake of 9.6% in 2015 and is now its biggest shareholder. At Friday’s closing price, Berkshire would stand to make a profit of some $210 million.
Axalta is perhaps best known for its long-running sponsorship of NASCAR teams and drivers. It also supplied paint to this year’s Formula 1 champion Mercedes, but it also produces coatings for everything from buildings to the Philadelphia Eagles’ field goal posts.
Akzo angered some of its shareholders by rejecting PPG’s $22 billion bid earlier this year. Activist investors Elliott Management led an aggressive campaign to force the Dutch company to accept the bid but was thwarted by a combination of resistance from managers, politicians, and local institutional investors, who feared that a merger would result in thousands of Dutch jobs being lost.
Swallowing Axalta would help protect Akzo against a fresh advance from PPG by making it too big to digest. However, the stock market didn’t like the news, pushing Akzo shares down 1.5% on fears that it would overpay in its eagerness to stay independent. For its part, Axalta said it “will pursue such a transaction only if its board of directors determines that it is in the best interest of Axalta to do so.”