Akzo Nobel Enters Tikkurila Takeover Battle With $1.7B Bid

Akzo Nobel has submitted a €1.4 billion ($1.7 billion) counterbid for Finnish paint and coatings producer Tikkurila.

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Akzo Nobel (0A00) has offered to pay €31.25 per share for all issued and outstanding shares of Tikkurila. This is 13% higher than the improved €1.2 billion takeover offer made by PPG on Jan. 5. The Dutch paints and coatings maker has asked Tikkurila’s Board of Directors to enter into talks to reach an agreement on a recommended voluntary public cash tender offer.

“The natural combination of AkzoNobel and Tikkurila would build on centuries of industry experience and a shared European heritage to create significant value for customers, employees, shareholders and other stakeholders,” said AkzoNobel CEO Thierry Vanlancker. “Bringing together our premium brands and leading portfolios would provide customers with a wider range of innovative products and services, including the most sustainable paints and coatings solutions.”

In reaction to the counterbid, Tikkurila stated that its Board of Directors will consider Akzo Nobel’s potential offer. Meanwhile, Tikkurila has also considered a competing offer made by Danish peer Hempel, that led to the increased offer by PPG (PPG), announced on Jan. 5. For now, the “Board of Directors determined that PPG’s offer, including the value of its offer, was at the time the best available from the perspective of the company’s shareholders,” the company said in a statement.

The potential deal is expected to be EPS accretive in 2022 and would be financed using existing cash and credit lines. AkzoNobel informed investors that the company would also continue its current €300 million share buyback program and maintain a target leverage ratio of 1-2x net debt/EBITDA.

Founded in 1862, Tikkurila is headquartered in Vantaa, Finland, with operations in 11 countries. More than 80% of the company’s revenue is coming from Finland, Sweden, Russia, Poland, and the Baltic states. Its premium brands include Tikkurila, ALCRO, and Beckers. Tikkurila employs about 2,700 people globally and reported sales of about €564 million in 2019.

Following the proposal, Deutsche Bank analyst Tim Jones cut Akzo Nobel’s rating to Hold from Buy and lowered the price target to EUR 96 (10% upside potential) from EUR 102.

The analyst is concerned that the buyout offer for Tikkurila will raise questions about the management’s capital discipline. (See Akzo Nobel stock analysis on TipRanks)

The rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus breaks down into 5 Buys versus 2 Holds. Meanwhile, the average analyst price target of €101.29 indicates 16% upside potential over the coming 12 months.