Akzo Nobel Spinoff Of Specialty Chemicals Moving Forward After Settlement With Elliott Management

It’s been a rough year for Akzo Nobel(AKZOY).  First, Elliott Management got involved. The activist fund was pushing for a breakup of the Dutch chemicals company. However, when US rival PPG(PPG) showed up with an offer to buy the whole company, Elliott began pushing the offer over management’s resistance. AkzoNobel was successfully able to leverage Dutch protectionism to fight off the takeover bid. Though AkzoNobel and PPG are in a mandatory six month cooling off period, PPG insists it no longer has any interest. Meanwhile, Elliott has been trying to force the removal of AkzoNobel Chairman Antony Burgmans over his unwillingness to accept PPG’s offer. The company announced that Burgmans will step down in April when his term expires.

Last week, Elliott lost its latest legal challenge, leading to the announcement of a settlement this week between Elliott and AkzoNobel.

AkzoNobel today announces it has reached an agreement with affiliates of Elliott Advisors (UK) Limited (collectively “Elliott”) following recent constructive dialogue, with the aim of normalizing the relationship with its shareholders.

The agreement includes alignment on the AkzoNobel strategy to fully separate Specialty Chemicals. In addition, Elliott will support the appointment of Mr. Thierry Vanlancker as a member of the Board of Management of AkzoNobel at the upcoming Extraordinary General Meeting on September 8, 2017.

AkzoNobel and Elliott have also agreed, subject to the terms of a standstill agreement, to seek to suspend all ongoing litigation for at least three months.

AkzoNobel today announces two new nominations to its Supervisory Board. Elliott supports their appointment.

Further, AkzoNobel intends to nominate a third Supervisory Board member, which will be done in consultation with the Company’s major shareholders, including Elliott.

Antony Burgmans, Chairman of the Supervisory Board of AkzoNobel, commented:

“I am pleased our recent constructive discussions with Elliott improved understanding between both parties. AkzoNobel remains focused on creating two world-class, high-performing businesses; Specialty Chemicals and Paints and Coatings. We look forward to a continued constructive relationship focused on creating value for all shareholders and other stakeholders. This agreement is fully in line with our ongoing program to strengthen and maintain a constructive dialogue with all our shareholders. We look forward to a successful EGM on September 8.”

Gordon Singer, CEO of Elliott Advisors (UK) Limited, added:

“Elliott is pleased to have entered into today’s standstill agreement with AkzoNobel. We believe AkzoNobel will benefit from the addition of the Supervisory Board nominees. Today’s agreement marks an important next step in positioning AkzoNobel for success and enabling the Company to deliver compelling value to all its stakeholders. As shareholders, we look forward to building upon the recent constructive dialogue with the Company.”

This agreement follows a wide-ranging set of measures previously outlined by AkzoNobel on July 25, 2017 designed to strengthen and maintain a constructive dialogue with its shareholders.

For us at Stock Spinoffs, the key sentence is that “[t]he agreement includes alignment on the AkzoNobel strategy to fully separate Specialty Chemicals”.  While it is uncertain whether the division will be spun off or sold in an IPO, the spinoff of the $11.7 billion Specialty Chemicals business  would be quite a large transaction. It might also create some consolidation opportunities with the upcoming Dow(DOW)/DuPont(DD) spinoffs.  With its 9.5% stake in AkzoNobel and the stock already up 30% this year, this position is already a big win for Elliott. With its new Board representation, it will have the opportunity to help create additional value for it and all shareholders.  Elliott has quickly moved into its new role, already removing all content at www.valuecreationatakzo.com

Disclosure: The author holds no shares in any stock mentioned