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AMSTERDAM (Reuters) - As U.S. paintmaker PPG Industries (PPG.N) considers whether to keep pursuing Dutch peer Akzo Nobel (AKZO.AS) after being rebuffed three times, the fate of the Dulux owner is moving into unchartered territory.
Lawyers and M&A advisors say an outright hostile takeover remains unlikely, but point to other potential outcomes.
While PPG still hopes to broker a takeover deal with support from a large proportion of Akzo's own shareholders, Akzo's boards are determined to remain independent and plan to issue extra dividends and sell a chemicals division to keep investors happy and suitors at bay.
Here's a look at pivotal moments to come and how they may play out:
On May 22, Amsterdam's Enterprise Chamber, the Netherlands' top business court, will hear a petition by Akzo investor Elliott Advisors calling for the court to appoint an investigator to examine possible mismanagement by the Akzo boards.
Elliott will also request permission to convene an extraordinary meeting (EGM) of shareholders to vote on dismissing Akzo Chairman Antony Burgmans, a former Unilever CEO.
Opinions differ on Elliott's chances: Dutch law explicitly grants shareholders the right to call an EGM, though the court may decide Akzo boards' decisions have been defensible and there is no need for a meeting to consider Burgmans' dismissal.
Given the importance of the case, the court is likely to act quickly and make its decision before the end of the month, though the timing is tight.
PPG must file papers detailing its intent to bid for Akzo to the Dutch Financial Markets Authority (AFM) by June 1, or agree to walk away for at least six months.
That filing, which is not made public, costs several million euros to prepare and includes details such as the intended offer price and proof PPG can finance its bid.
If the court rejects Elliott's request before June 1, that would strengthen the hand of Akzo's management and supervisory boards, and PPG may decide walking away without filing is the prudent course of action.
But if the court hasn't ruled by June 1, or rules in Elliott's favor, PPG may file with conditions for its offer, including a 95 percent threshold of shareholder approval.
It will take regulators some time - from days to weeks - to review and approve PPG's bidding papers.
If the Enterprise Chamber hasn't ruled on Elliott's suit by June 1, it will rule shortly thereafter.
If the ruling goes against Elliott, PPG would still have a chance to walk away without actually launching a bid. This happened in 2013 when Mexican tycoon Carlos Slim's America Movil abruptly ended attempts to buy Dutch telecom KPN.
In scenarios where PPG walks away, it will retain the option to return again in six months or a year later.
Akzo's planned disposal of its chemicals arm does not lessen the industrial logic of combining PPG's and Akzo's paints and coatings businesses. Many analysts are skeptical Akzo can achieve the financial targets it has set for itself on a standalone basis, and failure would weaken management's position if PPG returns.
If the court rules in favor of Elliott, shareholders must be given at least 15 days notice before an EGM is held, meaning that meeting would likely take place in late June or July.
That could encourage PPG to push ahead with a bid that Akzo's boards won't endorse.
Hostile takeovers of Dutch companies by foreign buyers are almost unheard of - with the notable exception of ABN Amro's disastrous 2007 buyout by a consortium led by RBS. However, in this case shareholder backing for PPG's approach is unusually strong.
Eight of Akzo's top 20 investors have come out in favor of talks, and none has come forward to oppose them. In all, 93 percent of Akzo's shareholders are foreign.
"We are not aware of any previous situation where it comes forward so prominently that U.S. and British shareholders are being ignored," said Paul Koster of the VEB, a Dutch shareholders' rights organization.
The prospect of an EGM would give both sides an incentive to enter talks.
Reasons for PPG to avoid a hostile bid include Akzo's right to issue 10 percent of its outstanding share capital at management's discretion, enabling it to block a hostile bidder from winning the 95 percent needed to squeeze out the rest and disband the company.
Akzo's unique corporate structure, dating from 1926, could be another deterrent as it grants four members of its supervisory board special powers when they deem the company at risk of a hostile takeover.
The four can veto any shareholder-proposed change to the company's articles of association. They also have the power to make binding nominations for candidates to replace any vacancy on the company's management and supervisory boards.
Burgmans would want to avoid a humiliating dismissal, but PPG would face the possibility of remaining board members nominating a replacement equally opposed to handing PPG unconditional control.
That would leave PPG, after spending 26 billion euros ($28 billion) or more in a takeover fight, unable to take the steps necessary to control and integrate Akzo's operations - undermining the point of the deal.
That kind of stalemate would be in neither side's interest, lawyers and experts agree, and the two sides would either come to a compromise takeover deal whereby both sides could declare victory, or PPG would walk away altogether.
($1 = 0.9161 euros)
Reporting by Toby Sterling; Editing by Susan Fenton