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NEW YORK (Reuters Breakingviews) - Antony Burgmans seems to have a different view of hostile takeovers now that he is defending against one. As supervisory chairman of Akzo Nobel, one of the jewels in the Netherlands' industrial crown, Burgmans is trying to stonewall an unsolicited $24 billion bid from PPG Industries, not to mention calls for his head. Akzo has refused to even discuss the offer, which its U.S. rival already has increased once.
It wasn't long ago that the clog was on the other foot. Back in 2000, the Dutch executive was co-chairman of Unilever when it was gunning for a reluctant target, Bestfoods. The American maker of Hellman's mayonnaise and Skippy peanut butter rejected meeting with the Anglo-Dutch consumer-goods giant, which had put forward an $18.4 billion bid in cash. Burgmans, at the time, called it "serious money." He was puzzled and amazed by his quarry's recalcitrance.
This is just one of many ironies dripping from the escalating paint skirmish, which has devolved into an international, and increasingly nasty, war of words and investor presentations. If M&A history is any guide, there's a better chance than not of a deal getting done, but the probability diminishes as the acrimony rises. What's certain is that both sides, in Amsterdam and Pittsburgh, have engaged in the sort of hypocritical rhetoric more suited to politics than business.
Consider the local protections cloaking Akzo that PPG is encountering. Founded in 1883 as Pittsburgh Plate Glass, the company now led by Michael McGarry actually enjoys a similar bit of cover. As a Dutch enterprise, Akzo is required by statute to consider all stakeholders, not just its shareholders. That means the perspectives of local governments, communities in which it operates, employees and unions are taken on board.
In the United States, a public company is typically run for stockowners first and foremost. There are variations on the theme, however, depending on where an enterprise is incorporated. For instance, PPG's home state of Pennsylvania created safeguards in 1990 – toward the end of the corporate raider era – against unwanted takeovers, including a "stakeholder provision" not unlike the one Akzo must consider.
Back when the law was passed, a number of Keystone State companies were allowed to opt out of the provisions, mainly because their shareholders opposed them. Among those that did were Westinghouse, which is now owned by troubled Toshiba of Japan, and H.J. Heinz, which was acquired by 3G, the Brazilian buyout experts, and eventually merged with rival Kraft. There's not much case law on the Pennsylvania rules, and it's not strictly relevant to PPG's role as an aggressor, but it has been invoked in a handful of corporate sagas over the years.
There are other insincere twists. One of the most obvious is that Akzo's response to the PPG deal has been to do exactly what PPG itself did a few years ago: break itself up. On Wednesday, Akzo Chief Executive Ton Buechner detailed plans to separate the specialty-chemicals operations that account for about a third of sales and profit, from the core business, which produces Dulux paints. Four years ago, PPG did the same when it carved out its chlor-alkali and derivatives business and merged it with a subsidiary of Georgia Gulf to create a new firm, Axiall.
That company was acquired last year by Westlake Chemical after a takeover contest that included – not unlike the Akzo situation – an initial offer that was judged too low, and a sweetened bid that also was rejected. That makes it more than a little curious that PPG would propose to buy a company with the same inefficient structure it abandoned just a few years ago. Further enriching the case, it's notable that PPG was advised back then by Lazard, the New York investment-banking firm now working on Akzo’s defense.
It's not uncommon for a company, like an elected official, to say one thing in one situation and do the opposite when the tables are turned. In the PPG-Akzo case, however, there are just so many examples. One of the more telling instances relates to one of the primary planks of Akzo's defense, which PPG can understand all too well.
Rewind again to 2000-era Burgmans. When Bestfoods was spurning Unilever, he argued that Unilever's recent purchase of Ben & Jerry's, the Vermont ice-cream maker run with a social conscience, showed "we have respect for the company with whom we are negotiating, respect for the brands and respect for the work they have done."
In an open letter addressed to Akzo's "stakeholders" earlier this week, McGarry pointed out that PPG made 18 "specific and measurable commitments" to the Canadian government when it bought a North American coatings business five years ago. He added that his company had met or exceeded those pledges, and would do the same in an Akzo deal.
If it's not ironic enough that McGarry ripped a page right out of Burgmans' personal playbook, the assets PPG was acquiring at the time were sold to it by, whom else, Akzo Nobel. In this ugly paint fight, it's hard to find anyone's true colors.