Dutch paintmaker Akzo Nobel NV is considering a merger of equals with U.S. rival Axalta Coating Systems Ltd., a deal that would combine two companies with a market value of about $30 billion. The Amsterdam-based company is “currently in constructive discussions” regarding a merger with Axalta, the world’s largest maker of auto refinish paints, Akzo Nobel said in a statement on Monday. A deal would create a leading global paints and coatings company, it said. The separation of Akzo’s Specialty Chemicals business, including the return of the vast majority of net proceeds to shareholders, remains on track for April 2018 and is unaffected by the merger discussions, Akzo Nobel said. Akzo Nobel is looking to pay close to no premium in any deal, a person familiar with the matter said over the weekend. Axalta, of which Warren Buffett’s Berkshire Hathaway Inc. is the largest shareholder, soared 17 percent in New York Friday after Reuters first reported the talks, valuing the company at about $8.1 billion. The Dutch competitor, led by Chief Executive Officer Thierry Vanlancker, has a market value of almost 20 billion euros ($22.6 billion) after shares climbed 30 percent this year.
Akzo Nobel has come under shareholder pressure this year after rebuffing an unsolicited $29 billion buyout offer from rival PPG Industries Inc. and battling activist investor Elliott Management Corp. PPG can renew its bid for Akzo Nobel in December under Dutch takeover rules. The Dutch paintmaker, which plans to separate its chemical division to tighten its focus on coatings, abandoned a target last month for 2017 profit growth after third-quarter earnings missed estimates. “The timing suggests the Akzo Nobel board wants to block off any possibility of losing its independence,” Laurence Alexander, an analyst at Jefferies LLC, said in a note.
Axalta, meanwhile, has posted two straight quarters of profit declines amid rising costs for paint ingredients. The company, formerly a unit of DuPont, would complement Akzo’s product lines, Michael J. Harrison, an analyst at Seaport Global Securities, said in a note. Axalta may sell for $40 a share, based on the 15-times earnings multiple paid by Sherwin-Williams Co. for Valspar Corp. earlier this year, he said.
A tie-up between Axalta and Akzo is “logical” given the rapidly consolidating coatings industry, Ghansham Panjabi, an analyst at Robert W. Baird & Co., said in a note. He sees Axalta potentially selling for more than $40 a share, noting it’s the last medium-sized asset left in the industry.