June 1, 2017 / 12:44 PM / 6 months ago

Akzo is emblem for new “fortress Europe”

LONDON (Reuters Breakingviews) - Akzo Nobel has laid down an important brick in the wall of fortress Europe. The maker of Dulux paint thwarted a strategically and financially attractive takeover approach by U.S. rival PPG that was vociferously backed by many of the group’s investors – and did so without putting forward a convincing defence. It’s an alarming precedent.

A view of AkzoNobel's headquarters in Amsterdam, February 16, 2012. REUTERS/Robin van Lonkhuijsen/United Photos

The 25 billion euro deal’s undoing was partly down to the Netherlands, where Akzo is based. Companies there are legally obliged to take the interests of all stakeholders – including communities, employees and customers – into account when evaluating takeover bids. Akzo Chief Executive Ton Buechner argued that, regardless of the touted 50 percent premium to the target’s undisturbed price, a tie-up would be harmful for stakeholders – something that’s hard to disprove conclusively.

The idea that takeovers are about more than just striking a good price is not just a Dutch one. In February, Germany, France and Italy called on the European Commission to introduce new legislation that would make it easier to block non-European bidders. In her manifesto for the general election on June 8, British Prime Minister Theresa May is promising to tighten the country’s takeover rules. France’s resistance to a takeover of yoghurt maker Danone in 2005 once seemed like an absurd outlier, but that may be changing.

The Akzo saga shows how shareholders can lose out when non-financial, political arguments gather momentum. In the short term, this may secure the independence of future Akzos and Danones, and protect some European jobs. But if Akzo becomes emblematic of a new fortress mentality, the continent will pay a hefty price. A corporate landscape shielded from competition will eventually result in less efficient, sub-scale companies, and that should be the last thing politicians want.

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