Akzo Nobel shareholders angered by the Dulux owner’s rejection of a 26.3 billion euro ($29.5 billion) takeover offer from U.S. rival PPG Industries took their fight to an Amsterdam court on Monday. Activist hedge fund Elliott Advisors, supported by several long-term institutional investors, asked the Amsterdam Enterprise Chamber to order an investigation into possible mismanagement by Akzo’s board and force an extraordinary meeting of shareholders to vote on dismissing Chairman Antony Burgmans.
Elliott Advisers and the other institutional investors together represent 18 percent of the Dutch paint maker’s shares.”A large group of shareholders has lost confidence in Mr. Burgmans and has asked to call him to account at an extraordinary shareholders meeting,” said Jan Willem de Groot, representing Elliott. “That’s a vote of no confidence by itself.”
Akzo was to respond later. At the start of the hearing, presiding Judge Gijs Makkink granted a request by PPG to address the court as an “interested party,” allowing it to speak after shareholders and before Akzo.PPG lawyer Arnold Croiset van Uchelen told the court the U.S. company remains willing to enter talks with Akzo, regardless of the composition of its management and supervisory boards.
As dozens of lawyers and journalists packed the courtroom for the hearing in the high-stakes corporate battle, PPG’s Chief Executive Michael McGarry shook hands with Burgmans. A ruling is expected within a week, soon enough for PPG to decide whether it wants to submit a formal bid to Dutch regulators without the support of Akzo’s board by a June 1 deadline or walk away for at least six months.
Despite impassioned pleas by several shareholders, experts in Dutch corporate law say it will be tough for the shareholders to convince judges that Akzo’s corporate governance has been so poor as to warrant an investigation.
Akzo, meanwhile, faces a potentially awkward public questioning of its reasons for rejecting PPG’s offer on May 8.
Shares in Akzo opened nearly flat at 75.48 euros on Monday, well below PPG’s 96.75 euros per share offer made on April 20, suggesting investors have significant doubts as to whether a PPG bid will ultimately succeed. Akzo has argued that the takeover would be bad for employees, that the companies’ cultures don’t mesh, that the deal faces antitrust risks, that the merger would be bad for the environment and that Akzo should remain Dutch in the country’s national interest. Those arguments have met with scepticism in some quarters.
Akzo will also be questioned on its alternative to embracing PPG – a plan to sell a third of its operations and pay shareholders a hefty dividend. The court’s decision will influence PPG’s decision on whether Akzo is worth pursuing further, given the company’s powerful poison pill defences.