Rival bid reveals cracks in paint mega-merger

Sherwin-Williams

27/05/2026 16:08

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Jennifer Johnson

    LONDON, May 27 (Reuters Breakingviews) - Paint M&A never truly seems to dry up. Less than a decade after rebuffing American aggressor PPG Industries PPG.N, Dulux maker AkzoNobel AKZO.AS is once again at the centre of a messy deal saga. The Dutch group late last year agreed to combine with U.S. peer Axalta Coating Systems AXTA.N. Yet an Akzo statement on Wednesday put a new color to the proceedings. The Dutch group said it had rejected a €12.5 billion cash takeover proposal put to it in April by Japan's Nippon Paint 4612.T and stateside rival Sherwin-Williams SHW.N, which both groups subsequently confirmed. It removes the gloss from the agreed merger, which is awkward for Akzo's board led by Chair Ben Noteboom.
The Dutch group said that the unsolicited proposal, which would effectively see the company carved up by Nippon and Sherwin-Williams instead of merging with Axalta, “did not come close” to reflecting its true value. Akzo also mentioned “insufficient deal certainty in relation to regulatory clearances”, presumably implying that the bidders would have a tougher antitrust ride than the deal already underway. That transaction, announced in November, would see Akzo shareholders get 55% of the combined group and Axalta's owners hold the rest, made possible by a €2.5 billion special dividend paid to the Dutch group's investors before closing.
The gatecrashing echoes 2017. Nippon then made a play for Axalta, which was engaged in aborted merger talks with AkzoNobel. The Dutch group had itself, at the time, only recently seen off hostile efforts by PPG.
The question this time is whether Akzo was right to send the interlopers away. The board has some questions to answer. The cash bid is 39% above where Akzo's stock was trading on Tuesday. It's also probably higher than the value of the Axalta merger for the Dutch group's investors.
Take the two companies' share prices just before the deal's November announcement, and adjust them for the 2% average price rise for peers since then. The implied fair value of Akzo and Axalta would be €15.2 billion. The targeted cost savings are probably worth some €3.3 billion, after applying a multiple of 10, and deducting tax and restructuring costs. That takes the total paper worth of the merged entities to €18.5 billion, suggesting Akzo's 55% share is worth €10.2 billion. Add the special dividend, after removing tax at 15%, and the total comes to €12.3 billion – below the rejected cash offer.
Of course, antitrust may indeed be a problem for Nippon and Sherwin-Williams, who are "considering their next steps, if any." Further, the Dutch target's so-called stichting foundation structure, with special voting rights, can act as an M&A blocker. Still, the share price reaction on Wednesday speaks volumes. Akzo rose about 20%, which makes a mockery of the board's view that its post-merger future is more valuable than the cash bid. Perhaps the suitors could up the ante by putting a little more money on the table. It’s clear that investors are much less excited about the Axalta deal than Akzo's board is. That’s something for the interlopers to work with.
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CONTEXT NEWS
AkzoNobel, the maker of Dulux paint, on May 27 said it had rejected a joint cash takeover offer of €73 per share from rivals Nippon Paint and Sherwin-Williams.
The offer represented a premium of 39% to AkzoNobel’s closing share price of €52.52 on May 26.
The Dutch group said the proposal undervalued its business, and that its board continued to recommend the planned merger with Axalta, which is expected to close in late 2026 or early 2027.
AkzoNobel's shares were trading at €63.14 by 1442 GMT on May 27, which was 21% higher than on the previous day.

AkzoNobel has trailed its rivals since agreeing to merge with Axalta https://www.reuters.com/graphics/BRV-BRV/jnpwrnbdnvw/chart.png
(Editing by Liam Proud; Production by Shrabani Chakraborty, Pranav Kiran)
((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))