Ladies and gentlemen, it's 3:00 P.M., and I have a background in logistics, so I believe in starting on time unless something prevents you from doing it. I hereby open the extraordinary general meetings of shareholders, and I would like to extend a warm welcome to all of you who are present here today at the Amsterdam Hilton. As most of you will know, this is my first meeting of shareholders in my capacity of chairman of the supervisory board, and I'm particularly pleased to be here today. I'm here together with Byron Grote on the right, who's our vice chairman, with Thierry Vanlancker to my left, who is the CEO, and Mr. Maarten de Vries at the end, who's our CFO, and Myrthe Bijleveld, who is our corporate secretary. I do apologize that we will do this meeting in English.
We do it for several reasons, of course, but first and foremost because my Dutch is not very good, and I think I get more out of it. I hope you will be able to do that as well. There is a translation offered, and you can use these, and if you go on channel one, I'm told it should be translation from English into Dutch. On October 1st, we successfully closed the sale of Specialty Chemicals to Carlyle and GIC. And as said at the meeting, at the other extraordinary general meeting in November last year, we would return the vast majority of the proceeds of that sale to you, our shareholders. Actually, the reason for us meeting here today is to approve the capital repayment and share consolidation of EUR 2 billion.
We're not here to approve the whole program, but the first step in the program is to change the composition of the share capital. It's quite complicated. It will be explained later by Maarten de Vries, but that is the first step in the repayment program of the remaining EUR 5.5 billion. We already did, or we will do in addition to that as follow-up steps once this is done, but this is not on the agenda today, a special cash dividend of EUR 1 billion, and a share buyback of EUR 2.5 billion, which will be stretched over some time because you can't go out and buy EUR 2.5 billion of shares in a few days. After that, we will have distributed the vast majority of the proceeds, which in total was net proceeds of EUR 7.5 billion.
You can ask questions to the proceedings both in Dutch and English. As I said before, the headphones are provided for those of you who wish to follow the meeting in Dutch, or if you want to ask me a question in Dutch, you're perfectly allowed. Then I will put on my microphone to make sure I understand it. In order to ensure an efficient meeting and to allow everybody to speak, if you want to say something, if you have questions, and you're more than welcome, please limit yourself to two questions. We only have one point to debate and to vote on, so I hope that's sufficient. I'd like to ask you to switch off your mobile phones so we can do this in good order.
Then I'll give the floor to our CEO, Thierry Vanlancker, who will give a short update on our 15 by 20 strategy and the recent developments. Please, Thierry.
Thank you. Thank you, Nils. Also from my side, a warm welcome to this EGM, and a good afternoon to everybody. Now, when I wish you a warm welcome, then the question is, why are there so many people standing outside in the cold? So it's probably good, if you allow me to say a couple of things on what's happening outside, and as this is a very local Dutch matter, I would also then repeat this part of the presentation in Dutch as well, so as you've undoubtedly noted and also undoubtedly heard, there are a number of AkzoNobel employees that have decided to gather outside of the hotel, in parallel to this meeting. As I stated, it's a very local Dutch matter. It's also part of the team within AkzoNobel Nederland.
And in fact, it is not really related to the topic of this meeting. Since multiple months now, the discussions are ongoing in relation to the collective labor agreement in the Netherlands. AkzoNobel has offered on what we believe a good final offer, but now for multiple months, the unions chose to have the pension discussion as a condition, to look before they start looking at the offer. And as we've outlined during the AGM already back in April, the company cannot enter into discussions around the pension. There's a whole number of accounting and legal reasons for that. But suffice it to say that that would endanger and jeopardize the company's global financial position and the strength, and therefore, in fact, impact all current employees, which we not deem to be responsible. Hence, we cannot engage onto that topic.
And we also sincerely hope that with the unions we can get this resolved as soon as possible and that we can include collective labor agreement, which is in the best interest of the employees in the Netherlands. [Foreign language]
I'll continue in Dutch. You must have seen that there are a number of employees that are making music outside, and not because they're so passionate about this EGM, but it's just to make their presence known with respect to a local issue here that concerns AkzoNobel Nederland. It doesn't have a direct bearing on the subject of this meeting. Undoubtedly, you're familiar with the fact that for months we've been conducting discussions with respect to a CLA, collective labor agreement in the Netherlands. We believe that AkzoNobel, from the very beginning, made quite good offer, but the unions have decided to have the pension discussion as a condition to look at our offer and to reach an agreement, as we've pointed out at the AGM in April of this year, because, you know, that many months have gone by, by the way.
For several accounting and legal reasons, for AkzoNobel, it's not possible to go into these discussions. They're requesting a voluntary contribution to the pension fund, and that would jeopardize the financial position and strength of the company and would have a direct negative adverse effect on the employees that are voicing their concerns outside. So we cannot engage in the matter, and as AkzoNobel, we would like AkzoNobel Nederland to reach a solution as quickly as possible with the unions in order to close the matter and to enter into a robust CLA for all employees in the Netherlands because that would be in their best interest.
Achievements towards our Winning together: 15 by 20 strategy, and we continue to make good and strong and solid progress in becoming a focused, high-performing paints and coatings company. During the third quarter of 2018, profitability increased as a result of our pricing initiatives in our company and cost savings program, and the profit increased despite challenging, very challenging market conditions, including significantly higher raw materials in about two years, about EUR 700 million in the meantime, and adverse foreign country currencies in many of the geographies. Our price mix was up by 6% as compared to the third quarter of last year, and this is based to, I would say, leading pricing initiatives that have contributed to higher return on sales for both the paints part of the business, the deco part of the business, and the coatings, the performance coatings part of the business.
The return on sales in the company was 12.3%, and that compares to 10% in the third quarter last year. And these are the numbers that correspond to the definition of the return on sales of 15% that we have in our 15 by 20. So we're obviously seeing the ship moving in the right direction despite significant headwinds that have hit our competitors probably even more. We have made continued progress on implementing integrated business planning, which we describe as IBP, which is a state-of-the-art integrated supply and operation planning, which will be a key enabler for the future performance improvement. Again, in the third quarter, we achieved more than EUR 30 million of savings during that quarter from our ALPS continuous improvement, the whole series of operational improvement projects really in every site around the world, and that has continued to successfully offset fixed cost inflation.
In addition, we delivered a further EUR 35 million of cost savings from our Phase 1 of creating a fit-for-purpose organization as a dedicated paints and coatings company, and this is totally on track with our earlier announced intent for EUR 110 million cost savings impact to the bottom line in 2018. On the next slide, I provide a little bit more details on the next step, the following step of our transformation. Our focus on value over volume, despite challenging market conditions, demonstrates how we are well on our way to create a high-performance culture. In the next steps of the transformation that you see detailed here, you see that our plan is to deliver an additional EUR 200 million annual cost savings by 2020 that should contribute largely towards our target of 15% return on sales, as we set as our goal.
Almost half of the savings of this EUR 200 million will come from integrated supply chain, while the rest will be achieved by other cost items like SG&A and the R&D functions. Cost savings will be realized throughout 2019 and 2020. As a focused paints and coatings company, there are many ways of working closer together as we take the next step in our transformation, winning together 15 by 20. In fact, we are very proud of how our organization launched it, and you see that in the banners in the back of the room, what we call Paint the Future, an initiative to really get deep into open innovation with startups to get open innovation as winning together to really improve and increase and leapfrog on what our competition is doing with coatings.
I would like to go on and on and on about the initiatives we take, but unfortunately, that is not the purpose of this meeting. So let me get to the order of business on why we're here. As Nils outlined, AkzoNobel announced in April 2017 the plan to separate from Specialty Chemicals division. We also said back then we wanted to do this within 12 months. And in fact, to show our intent, there was an advance proceeds that were paid as a special dividend of EUR 1 billion to the shareholders back in December 2017. In March 2018, 11 months after the announcement, so a bit quicker than the 12 months that we announced, we announced the sale of Specialty Chemicals to The Carlyle Group and the GIC. The sale of Specialty Chemicals was fully completed on October 1, 2018.
We then also announced that the shareholders will receive a further EUR 5.5 billion over and above the special dividend of EUR 1 billion that they already received. As indicated by our Chairman, the reason for this extraordinary general meeting today is to approve the capital repayment and the share consolidation part of EUR 2 billion. I thank you very much for your attention, and I will hand it back to Nils.
Thank you, Thierry. We'll now proceed with the formal part of the meeting. This is agenda 1A to 1D, and that is about the capital repayment and share consolidation. What we ask, and we said it a few times, today is the approval of the capital repayment and share consolidation.
I said it before, but I'll just repeat it, and this is the first step in the repayment process related to the remaining EUR 5.5 billion, and will in itself, in isolation, result in a payout to our shareholders of EUR 2 billion, in the second half of January 2019. And the reason why there's a delay is that the creditors to the company need to give their consent or at least not protest. The technicalities are, as I said, rather complicated, and it is explained in the shareholder circular and the other documents that have been published in this section of our website, related to this meeting. But on top of that, I think it would be very useful if Maarten de Vries, our CFO, can walk you through the whole process, and hopefully make sure that we all understand exactly what the different steps mean. Maarten, please.
Good afternoon, everybody. What I will do now is bring you through some of the details related to the additional EUR 5.5 billion return to shareholders. This is in addition to the EUR 1 billion advance proceeds, which was distributed by special cash dividends paid on December 7th of last year. The additional EUR 5.5 billion proceeds will be distributed using a capital repayment and share consolidation of EUR 2 billion, a special cash dividend of EUR 1 billion, and a share buyback of EUR 2.5 billion. As Thierry mentioned to you earlier, this means a total of EUR 6.5 billion will have been distributed to shareholders, delivering on our commitment to return the vast majority of the EUR 7.5 billion net proceeds from the separation of the specialty chemicals business. Remaining proceeds will be used for the repayment of debt, cost associated with the transformation, and bolt-on acquisitions.
The reason for this EGM today is to approve the capital repayment and share consolidation of EUR 2 billion. The combination of a capital repayment and share consolidation is, in fact, comparable to a share buyback. Shareholders will receive the market value in cash for the numbers of shares that will be reduced. This is applicable to all shareholders for the same ratio. The cash for the repayment comes from the company's nominal capital, and this return of capital is tax-exempt in the Netherlands. The process of combining capital repayment to all shareholders with share consolidation has been applied by many Dutch multinationals with broad international shareholder bases. An EGM like the one we have today is necessary to gain shareholder approval for amendments of the articles of association.
The capital repayment and share consolidation has many advantages, including fast return of cash to shareholders, tax optimization, and enhanced future earnings per share. As mentioned, amendments to the articles of association are necessary to conduct a capital repayment and share consolidation. Three steps are required to make the necessary amendments. First, the fiscally recognized share premium is converted into nominal capital, in fact, increasing the par value per share to create room for the capital repayment. Next, a share consolidation is conducted to eliminate the effect of the capital repayment on the share price by decreasing the number of outstanding shares. And finally, a capital repayment reduces the nominal capital, in fact, again, decreasing the par value per share, and the cash distributed comes from the company nominal capital. If we receive approval for the amendments of the articles of association, then a two-month creditor objection period will exist.
The capital repayment and share consolidation is therefore expected to take place in the second half of January, so basically 60 days after 60 days from now. This slide shows an illustrative example of the capital repayment and share consolidation. A shareholder currently holding 10 shares, each with a share price of around EUR 80, for example, will in the future have nine shares with a share price of around EUR 80 and receive EUR 78.39 in cash. In this example, a rounding adjustment of EUR 1.61 results from the consolidation steps, the three consolidation steps. The share consolidation ratio will be determined by the board of management shortly before conducting the capital repayment.
Shares will be rounded up or down by banks and brokers if the numbers of shares held cannot be divided by the denominator of the consolidation ratio, which is 10 in this example, depending on the particular contractual arrangement between the bank or broker and the shareholder. Shareholders can contact their bank or broker in case of questions about the rounding of shares. Thank you for your attention. I really hope that this presentation was helpful in providing further details related to the additional EUR 5.5 billion return to shareholders, and in particular, the EUR 2 billion capital repayment and share consolidation.
Thank you, Maarten. That brings us to the part where everybody is free to ask questions. We'll be happy to take these questions related to this point now. Who would like to start? Please state your name, and you can go to either of the microphones.
Thank you, Mr. Chairman. I'm asking my question in Dutch. Otherwise, I will get trouble with my grassroots. We wonder you are splitting the return in two parts. On the one hand, reducing the number of shares, and then you're going to buy back shares. Well, in the past, we have had trouble more often when companies repurchase their own shares. So we wonder why you don't reduce the number of shares by a larger number in order to eliminate the risks of such purchase.
Question, I'll give it to Maarten. This is rather technical.
Should I answer in Dutch?
But what we do with the capital reduction, we make maximum use of the headroom we have in capital reduction. That's EUR 2 billion vrijgesteld van belasting, and by using this maximum headroom, we arrive at this capital reduction.
But you mentioned twice EUR 2 billion.
That is not the case. As I said, we are using the maximum headroom at this moment.
Yes, that's correct. But after this moment, there will be another moment, and there will be another one later again.
Okay, let me add, of course we discussed this with our shareholders. The facts are that shareholders would firstly like to see a fast payout of the proceeds, most of the proceeds. So they want to see the optimum tax-exempt way to do that. And I've also looked at the split between a capital reduction and special dividend and share buyback, and that whole package is, has been composed in the best way possible.
Extra comment, I can only underline what Mr. de Vries has just explained. Both of us, together with investor relations, have been working towards, with major shareholders. And if we asked 100 people, we get what? 120 different opinions. So we got to the largest common denominator, and then this is a combination of dividend, share buyback, and capital reduction. So it's, it's a combination of what is legally possible, what is, possible in terms of accounting, and what, the geographically divided shareholder base finds best. As a company, we were relatively, unfamiliar with how this would, unfold.
So if I understand things well, then the opinion of the Anglo-Saxon shareholders has, decided the case.
No, not really. Of course, by far the vast majority are Anglo-Saxon. So please don't refrain from buying any more shares if you want. But that is definitely a decisive thing. But we could see very few differences between major European and Anglo-Saxon shareholders.
Thank you.
All right. Share buybacks is a pretty generally accepted principle of a way of returning cash to shareholders in any country, I think. So thank you very much. Next question. I will just switch microphone.
Okay, well, I'll also do this in Dutch because we are a Dutch company, that's working all around the world. My question would be, this program, when is the final day that the shares start counting? Is that today? Will it be next week? Is it going to be by mid-January? When is the final day that things start running? So when do you need to have the shares? Is it applicable to shares you have now, or can you still buy some extra shares to create some more return? When is the final day?
Yes, I explained before that we, have, a creditor objection period of 60 days. So after 60 days, just before the expiry of that 60-day period, the board of management is going to look at the consolidation ratio, and then we are going to set the record date and the payment date, and we'll publish it as then at that point, so after 60 days.
All right, thank you.
Good afternoon. My name is Steve from Amsterdam. You've just mentioned the 60-day creditor objection period. What are the risks lurking there? If there is, if there are objections, will the timeline be shifted then?
We don't see any such risks occurring. This is a legally required objection period, and we don't expect any sort of jeopardy at all in connection with that.
Any further questions? Yes, please. Yes.
Good afternoon. I'm Erik de Vries. I am a trade official for the FNV Procesindustrie. It's regrettable that a large number of the people present I have had to miss. You may have missed that, but there's quite a number of people outside, employees of AkzoNobel Nederland, who have wanted to voice their protest against the way in which AkzoNobel is dealing with its Dutch employees at this moment. The reason they are doing so, and that would be my first question, is to do with what has been going on, or the situation with PPG. AkzoNobel has emphatically asked stakeholders to voice their support against the acquisition by PPG at the time, which we did. And as one of the stakeholders, FNV Procesindustrie, but other trade unions as well, said, "Listen, we don't want this. We don't want an American company, with all the backgrounds that we know as trade unions, of American companies, in this way, is going to take over our industrial Dutch heritage without us knowing what they're going to do with it."
Of course, we considered all of that. We discussed this with between the unions, and in the end, we decided to publicly voice our support for that. AkzoNobel has always been grateful for this in public. It's always said, "Look, we appreciate what you've done," and we've always told AkzoNobel, excuse me, [Foreign language] Yes, I will.
My question to you is why AkzoNobel, on the one hand, has asked us as trades, as trade unions to support it, the organization in itself. I'd like to hear from you why it is that at the moment when employees and trades union members ask you to support them at the moment when it turns out that there are serious problems with their pensions, that you look the other way. That would be my first question. Shall I also give you the second one, or would you like to tackle the first one first? Okay, right. My second question is, in the discussions we had with AkzoNobel Nederland, Akzo always argued that it would not be possible, technically speaking, to talk about the repair of pensions.
Well, in the past days, we've had talks with Nouryon, the new name of the chemicals division split off. We've asked Nouryon the same question to reflect on the possibilities for solving these problems. We've asked for recognition of the problem. We've asked for an assessment of the extent of the problem, and we've asked for an examination by independent experts into solution directions.
We got the second question as well, and if you would, I mean, have an understanding that this is not on the agenda today. Anyway, I'll ask Thierry to give you a reply.
[Foreign language] . Well, if you allow me to finish, my question is why does AkzoNobel say no while Nouryon says, "Let's discuss it and come and sit down with us." All right. I can only hope, Mr. de Vries, that you have shares and that you have come in with your own votes. Why do you look the other way?
Well, that is very sympathetic from your mother. Well, my answer, we are not looking the other way in connection with the pensions. Meanwhile, we have had three highly regarded experts looking at this. We can't change that. Of course, the input from the unions was welcome last year, but I hope you are aware that employees also helped themselves and didn't just not just an anonymous company. The second thing I'd like to remark is that the whole pension story does not give any other option. There's a defined benefit program. If we give you, if you say you're right, many of the people outside will lose their jobs, and you wouldn't want that. For our current employees, it only would be disadvantageous. The second answer, as for Nouryon, two different companies, two different styles.
I like to stick by what is possible and what is not possible, and I refrain from raising false hope. So we don't negotiate that way. We've been very clear from the very beginning what is and what is not possible. And as trade unions, you understand that. But by now, I think that more than 90% of the employees would like to have the collective labor agreement and do not like this going on.
Not on the agenda. So I think we have given an answer and kindly understand if we don't take more questions on this one. Who would like to ask the next question on the agenda point or other matters not related to union pensions? So no further questions. That will bring us to the point where we start the voting.
We now have the attendance list. I'll just get it. It's here. We have attending today capital, share capital of EUR 380,249,249,132 represented, and that's a total number of 190,124,566 votes, which corresponds to a share of the total capital of 74.20%. I think before we begin the voting, I'd like our corporate secretary, Mrs. Bijleveld, to address some procedural matters, please.
Thank you, Chairman. For the voting process, you have been issued with a voting device, a chip card, and a voting card. The voting card also gives you instructions. Should you have any questions, please raise your hand, and one of the hostesses will explain the device to you. You're kindly requested to return the voting device and chip card at the door when leaving the room at the end of the meeting.
Shareholders have been given the opportunity to vote remotely via the ABN AMRO website. René Clumpkens, civil- law notary, will cast the votes as the proxy and independent third party for the participating shareholders. For this meeting, the 16th of October 2018 was set as the record date. Anyone owning shares on that date was entitled to register to attend, vote, and participate in today's meeting. Explanation of how to register was contained in the notice for this meeting. The notice and agenda were published on the AkzoNobel and securities info websites. A copy of the investor presentation and the complete agenda and notes have been placed on the information desk. This meeting has been properly convened and is entitled to adopt legally valid resolutions on the agenda items. Thank you.
Thank you, Myrthe, and we'll now move on to the voting. All proposed amendments to the articles of association under agenda item one are necessary to implement the capital repayment and share consolidation. These amendments are put to vote as one item. I'll announce clearly when I open the voting and let you know when I close the voting. After the vote, the results will appear on the screen, hopefully, if it all works, and we will also see whether, and I will announce whether it has been approved or rejected, hopefully, clearly, approved. The voting result will also be published on the voting process or the on our website after the meeting. There will be three slides coming up, I think. They will be shown on the screen as follows. A slide, the first slide should be there now. That should be the voting device. Can we?
So do we have someone, an expert in the room?
The voting site is not available.
Okay.
Please move on with the vote and open the vote.
Yeah. Okay. So what we will do is we have, of course, collected already all the votes that have come in, in advance, by the shareholders who are not present here today, and I would ask everybody who are against the vote or against the resolution to raise their hands and state their name.
Yeah, we can, I can, if you go to the vote, then it should be, yeah, it's gone.
Oh, okay.
Yeah. So you can use your device.
Okay. So what does that mean now?
So the results are shown here.
Okay. So we have closed the vote miraculously, that's because you know the voting devices better than we do up here. So thank you for that. And now we have the result, hopefully, in a minute on the screen. We had 189,157,546,000 votes for, 1,441 against, and almost a million abstained. But that means that we have a pretty clear majority, and I can conclude that the resolution has been adopted. Thank you very much. And I ask the corporate secretary to record that result. I would like to thank you all for your input here today, and it also goes for the employees outside. Someone is speaking from the house, but without a microphone, so the interpreter cannot hear the speaker properly. They should use a microphone.
Any other business? [Foreign language] . I have a point. If there is a if questions can be answered during the any other business round, then I would have one question there. I can ask that question then. Yes? In June, we saw the finish of the Volvo Ocean Race, and I saw that shareholders from Brunel were invited to attend that program in connection with that. I sent Akzo a letter about this. Akzo never responded, which I feel really regrettable for shareholders who have been very loyal. Akzo should also organize something for shareholders. A number of activities were deployed, but they were not accessible to shareholders. Brunel sent me a beer, gave me a beer as an Akzo shareholder because they felt a bit, well, awkward about this. But I don't think that would be something you should do like that again in future.
Thank you for your input, and I'm sure we will consider how to do that better in the future. So any other business? If not, then, thank you very much for your, for your inputs and, including, as I said, the input from the people outside and the remarks on the pension. We will now proceed with the repayment program after having approved this first step. Thank you very much, and have a nice afternoon and good evening.