Ladies and gentlemen, thank you for holding, and welcome to the Akzo Nobel conference call. At this moment, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. I would like to hand over the conference to Ms. Diana Abrahams. Go ahead, please.
Thank you, operator. Good morning, everyone. It's Diana Abrahams, head of media and public relations at Akzo Nobel. Thank you for joining our media call this morning. I will hand over to our CEO, Ton Büchner, who will outline a few key messages before we open to a Q&A session. Over to you, Ton.
Thank you, Diana. Good morning to everybody on the call today. You will have seen the announcement this morning, so I will be rather brief. Akzo Nobel announced today that after an extensive review, we're declining a third unsolicited, non-binding, and conditional proposal submitted by PPG Industries on April 24, 2017, for all the outstanding ordinary shares in the capital of Akzo Nobel. Akzo Nobel has concluded that our own strategy presented on April 19 offers a superior route to growth and long-term value creation and is in the best interest of shareholders and all other stakeholders. This decision follows considerable in-depth analysis of PPG's proposal by the supervisory board and the management board of Akzo Nobel, working closely together with our financial and legal advisors.
We have tested the PPG proposal on four key areas: value, certainty, timing, and stakeholder considerations, and the details you can find in our press release. As part of this review process, on May 6, Antony Burgmans, chairman of the supervisory board of Akzo Nobel, and I, met with Michael McGarry, chairman and CEO, and Hugh Grant, the lead independent director of PPG. The extensive review and the meeting with PPG confirmed to us that our own strategy is better and does not contain the risk and uncertainties inherent in PPG's proposal. We have a strong track record of delivering on our commitments and are fully focused on accelerating growth momentum and enhanced profitability with the creation of two focused, high-performing businesses, paints and coatings, and specialty chemicals. For the latter, we've already had banks appointed and are well on the way with project teams to do the separation.
We remain confident that our strategy will build on the existing growth momentum within Akzo Nobel and create a step change in value creation for shareholders and all other stakeholders. With that, operator, I will be happy to take questions.
Of course, Ms. Abrahams. Ladies and gentlemen, we will start the question and answer session now. If you have a question, please press star one. For questions or remarks, star one. Go ahead, please. Okay. For questions or remarks, star one on your phone. Go ahead, please. For questions or remarks, please press star one on your phone. The first question comes from Ms. Ellen Proper of Bloomberg. Go ahead, please.
Yes. Good morning. Thank you for the next opportunity.
Okay.
I'm wondering, as PPG said in the statement, they came out with in response to Akzo Nobel statement this morning, that the Akzo Nobel Chair stated upfront that they did not have the intent nor the authority to negotiate. Could you confirm and explain why not the authority to negotiate?
The meeting was set up as part of the evaluation of the third proposal. It was an important part of the evaluation process. We went in open-minded, and that importance, I guess, we will confirm because it was an important part of the evaluation, and we would consider a meeting as beneficial. Overall, I guess the statement that we made this morning that you see in the press release and we will repeat is that was an integral part because the board felt that as part of the review, a meeting would be beneficial, and that's the way we've looked at it.
How did you enter into that meeting? Did you expect anything in that meeting would be said, which could lead to a deal or negotiations toward a deal?
We went into the meeting with an open mind, and we've been careful listeners, and we certainly made it an integral part. As we mentioned, it was a private meeting, and therefore, it would be inappropriate to provide details of it. We went in with an open mind. We thought it was a cordial and a respectful meeting both ways. Yeah, details, of course, of a private meeting is something that we would think is inappropriate to disclose.
Okay. Thank you.
Next question, Mr. Bart Kosto of ABN Financial News. Go ahead, please.
Yes. Good morning, Ton. We just received a statement of PPG themselves. They stated that the Akzo Nobel chair stated upfront that they did not have the intent nor the authority to negotiate. That's, I think, a bit in contrary with what you said about open mind starting this meeting. Can you explain how? Is it correct what PPG is stating there?
We went in with an open mind.
The meeting was set up as part of the review process of the third proposal. We thought the meeting was beneficial. That was also the reason why we made sure that the meeting was there. That's really what it is about. For us, it was a very cordial, a very respectful meeting, a meeting that made as part of the review process, and we've considered it beneficial. It really also has allowed us to take all of this into consideration, together with what the advisers have told us, together with what shareholders have told us, and come to the conclusion that we stated in the press release, and that is that we will focus our energy on the strategy of accelerating growth and value creation, the strategy that we've announced on April 19th.
From where we come from, this was a cordial and respectful meeting where we went in with an open mind.
Okay. It's not true that you have said at the beginning of the meeting that you have no intention or authority to negotiate?
We went to the meeting with an open mind. That is the important part. We have been totally open-minded when it comes to listening what was said in the meeting, and again, it was a discussion which we've perceived beneficial.
All right. Okay, a second question is that what I missed in the statement of today's press release, I missed the word unanimously, which you used in previous press releases. Is that a coincidence, or I mean, the decision not to go into the proposal of PPG, was that unanimously taken by the board and the board of directors and the two boards, so to say?
Yes, Bart.
Okay.
The decision was taken unanimously by both boards.
Okay. Thank you.
Next question comes from Liam Bransma of Business Insider. Go ahead, please.
Good morning. Hi, good morning. Thanks for your time. I have a specific question about in your statement in the first paragraph, you're referring to the fact that PPG has never undertaken an acquisition of this size. I'm trying to read in between the lines here. Are you saying that it might be a big problem for them to integrate AkzoNobel because they don't have an experience with such a big takeover? Would you think that that would be even more difficult if the takeover offer would be hostile?
We've basically stated that a magnitude, global scale, and complexity of an acquisition like that is something that they have not done.
Okay. Thank you.
Next question comes from Jan Hennop of AFP News Agency. Go ahead, please.
Good morning, Ton. It's Jan Hennop from Agence France-Presse.
Good morning.
I just wanted to ask you. This is dragging on, and it looks more and more like a hostile takeover. You probably saw on Friday that Standard & Poor's issued a statement saying that Akzo Nobel ratings was placed on a credit watch negative. With the ratings agencies now looking at the deal as well, how big do you think is the pressure on you guys to go into this deal? How do you deal with that pressure?
Well, I guess, the tonality has not been friendly, let's say it that way, from the start. That we will not dispute. That is something that really dates back to March 2. When it comes to your second question, on the S&P side, we've always said that our aim is going to be a BBB+ company. We have been upgraded to A-, but we've always clearly stated that that was not our stated aim. That was just the situation that we were in and the evaluation of S&P at that point in time. We are still an A- with a negative watch. Again, it's aligned with our stated desire that we're looking for a strong investment rating, which would be around BBB+ in that.
For us, again, having designed both the paints and coatings and especially chemicals businesses that way, it is not a surprise to us and for us also not a negative sign, because the A minus was never an objective for us to be there. That basically links back to the plan that we presented on the 19th of April, where you can see what we've been aiming at for the business of paints and coatings as a triple D plus business going forward. That's been the stated aim in that presentation, and therefore, the fact that S&P puts us as a negative watch is not something that worries us. The plan clearly shows that we will provide increased cash returns to shareholders, accelerated growth, and improved profitability, and that is part of the combined evaluation made.
Thank you very much for that. Final question from my side. In the statement this morning, you also referred to the differences in culture between PPG and AkzoNobel, and I'm just wondering if you could expand a little bit on what those cultural differences are.
I guess if you look at a process like it's been unfolding right now, I think you're seeing clearly different tonalities in the way people have approached this. We look back at this process with seeing that it certainly is one demonstration of a difference in culture. If you look at March 2, and you take a progression to today. This is not, I think, the way we would have done things. Understanding of the stakeholder base, if you compare things like safety statistics and sustainability issues around other stakeholders, we do see that there are differences, and that generally has an impact when you put two significant size organizations together. That is what we've raised, and it's an observation that I think with the communications that are done are certainly confirmed if you look at it today.
We truly looked at the meeting as a constructive and cordial meeting, and that we really went in with an open mind. Therefore, from where we sit, some of the communication that you are observing are at least an indication that there is a different culture.
Thank you very much.
Next question comes from Mr. Didier Burg of Les Echos. Go ahead, please.
Didier Burg, Les Echos, French daily. I was wondering, following the meeting you had this weekend, apparently you didn't convince PPG that his offer was not good enough. I know you will not discover any of the content of that meeting, but do you think you have convinced PPG? Because you've issued this morning a very long press release, which seems to be convincing, but apparently, you're not very positive about that meeting. That's my first question. The second one is that what would you be expecting from the Dutch government, following what was said last week, that there should be more protection for Dutch multinationals? Thank you.
Right. As you yourself already indicated, indeed, for us it was a private meeting where we will indeed not provide details. It was an integral part of the review. We've felt it as truly important to have the possibility to listen carefully to what additions or possible modifications or potential changes to the proposal would be. We've not observed these. We believe it is not our duty to increase and change the offer and improve the offer on their side. We have been very careful in providing this meeting as part of the review process. In that sense, I guess I can only repeat myself in saying it, in our eyes, was a beneficial meeting in terms of the things that they've described. Your question on the government. Yeah, the government is having discussions at this point in time.
As we've always said, business is business, politics is politics. We are not politicians, and therefore, again, it's an independent movement. Something that you've seen, of course, in different countries, that people are getting more concerned about what happens both in the business world as in other populist kind of events that are taking place. As mentioned, business is business and politics is politics. Our discussion and our press release this morning is independent of politics.
Just a second question, Michel van Agt now. It's been said that maybe the government will extend the period, which should be a period of thinking about this offer. Do you think you'd be swayed by such a measure?
Well, apparently, there are discussions going on. We've read that in the newspaper as well. We will monitor that carefully, that's really up to the politician. Our focus and energy is going to the plan, the plan to create two successful high performing businesses and to accelerate growth and to provide increased cash returns to shareholders. That's where our focus is, but we are monitoring it in the newspapers closely.
Thank you.
Next question. Mr. Didier Burg, Les Echos. Thank you. The next question, Mr. Arash Massoudi of Financial Times. Go ahead, please.
Hi there. It's Arash.
Good morning.
Hey, Ton. I guess my question is, having covered several of these kind of large, complicated, bear huggy cross-border deals, it's sort of unprecedented for me to see so many of the largest shareholders of the target company speak out so publicly, and in some cases so virulently, against the board's handling of the situation. What's your message to these shareholders today, who I think it won't be very surprising what the reactions will be in the next several hours. How do you win these guys over, and how do you maintain order in your shareholder base? I have a feeling there's going to be a lot of angry shareholders.
We have, as we've mentioned in earlier discussions also with you, been very close to shareholders and have been listening very careful to them. Also, after the third proposal was received, we have been with shareholders on a multitude of continents. We take the combination of what we hear from shareholders, advisors, what we heard from the meeting into consideration. We have, as mentioned, had the meeting this weekend, and this engagement for us has helped us to evaluate what was there. In that sense, I guess we will continue the discussion with shareholders, and we will continue to listen carefully. That part will not change going forward. The key part, of course, is for us to focus on the delivery of the plan, and make sure that we can also show consistent progress going forward.
Okay. I guess the other question that came up when I was researching the situation the last few weeks was sort of how the board and the management thought that their proposal, the April 19 proposal, had more visibility than the PPG offer. Do you want to just walk me through why you guys think you can deliver faster on your plan than the value that PPG would generate?
Well, what we have in the plan of the 19th of April is a clear increase of shareholder return. When you're in a certain time point, for example, today, you can actually see the next time points of clear returns to shareholders. If you look at today, you will have a dividend in May, you will have a special dividend in November. You have an increased guidance for the 31st of December this year, subsequently followed by a 50% increase final dividend in May 2018. At every point where you stand, you can actually see a tangible increase in shareholder returns from the plan that we've presented. As well as the fact that we have clearly stated we intend to separate specialty chemicals within 12 months. That part also, we said that the vast majority of net proceeds will go to shareholders.
In contrast to that, I guess the proposal that we have on the table from PPG doesn't have these very timely kind of returns to shareholders. Of course, there is additional risk and insecurity. I guess the timing aspect and the visibility of it is because at every point in time, you can see where the next cash return to shareholders is in the foreseeable future.
Okay, thanks.
Next question comes from Mr. Hans Verbruggen of Het Financieele Dagblad. Go ahead, please.
Yes. Good morning, Ton. What was the reason that the board decided to go to talk with PPG? What was the difference with the first two occasions that you didn't decide to talk with PPG?
We as board felt that as an important part of the review, a meeting would be beneficial. There were descriptions where we felt explanations would be beneficial, and we do think it was a beneficial meeting. As I said, we perceived it as respectful and cordial from both sides. It has provided more clarity. The boards decided that on the basis of the third proposal, a meeting like this would be beneficial. We confirmed that in our eyes it was.
I understand it was beneficial, I understand that the board decided it will be beneficial. Why?
Because again, we have done the rounds, both with our advisors, with both boards itself, with our talks to shareholders. We looked at the four areas in terms of value, certainty, timing, and stakeholder considerations. We're looking, of course, at the meaningfulness of the commitments and solutions that are customary in such transactions. In the discussions, as I said, we've understood some clarifications, but it failed to sufficiently address the shareholder concerns and the stakeholder concerns that we have raised, including areas around regulatory environment. We really felt that on the basis of the third proposals and the discussions that we've had with many of our stakeholders, including shareholders, that a meeting like that would be beneficial for the evaluation of the third proposal, and we felt that it has been.
Why at the first two times you didn't decide to go to talk? What was the difference?
You've seen, I guess, the last proposal of PPG, which was provided on the internet by them. On the basis of the content of that proposal, we thought it would be good to have more clarity on the comments made. That's why, again, with this proposal being different from the previous ones, we thought it would be beneficial.
Is this meeting, has this been organized on the initiative of AkzoNobel or on the initiative of PPG? PPG suggests that it was on its initiative.
What happened was that there's been a phone approach, then a meeting was agreed upon by the parties. That is what happened. That's really the detail, I guess, that we can provide. Parties mutually agreed to meet.
There is not a one-sided initiative taker?
We mutually agreed, on the basis of phone calls, to meet, and that's what happened.
My last question is, did you hear new things in Rotterdam?
We did not hear new things or more tangible or more clear commitments or a solution customary in major transactions. We did not hear additional things there.
Okay. Thank you.
Next question, Mr. Dirk Veenstra from RTL Z. Please go ahead.
Good morning, everyone. Good morning, Mr. Büchner. You said you went into this meeting open-minded again. I still have a question about it, because you also said now on this conference call that you heard no additions, no modifications, no changes. You didn't observe any of that. How open-minded were you? What did you expect?
We went in, as I said, clearly open-minded. There was no preset opinion set. It was an integral part of the review that we were doing. Again, talking about expectations is, we basically went in with thoughts on the third proposal to see whether there were the meaningful commitments on customary major transactions, the ones that you see in the Netherlands, the stakeholder concerns that are there. You will see a lot of that written in our press release, that we really said, let's go and listen carefully to things that are customary in transactions like this, to see if we have missed something in the written paper, or if there's additions that they would want to provide. Therefore, yes, we've listened open-minded and carefully. That doesn't mean that we've heard something significantly new on the topics I just mentioned.
PPG says in the issue that they stated this morning that you, Akzo Nobel, there at the beginning of the meeting was solely for the purpose of reviewing this third proposal. If there would be any additions, modifications, it either could have been a three plus or maybe a fourth proposal, but you were not willing to talk about something else other than the third one. Still coming back to my first question, what is open-minded?
You're speculating on what may be in the meeting. For that, I think we respect for sure what happened in the meeting and don't believe that providing a lot of details is beneficial. We went in with the clear intention to talk about the third proposal. We have spoken about the third proposal. Any speculation on that, we have actually truly been, and I maintain that I thought the meeting was very respectful and cordial, that it was really something where we have really carefully listened, and I cannot describe the meeting any else than respectful and cordial. That's really the way I felt the people were dealing with each other during that meeting on Saturday.
How did the two parties leave the meeting? Shaking hands?
It's an interesting question. Yes. We shook hands when we left the meeting as we did when we entered the meeting.
A cordial and respectful meet. Okay, thank you very much indeed.
Next question comes from Ms. Terry van der Heide of NRC Handelsblad. Go ahead, please.
Hi, good morning. I have a question regarding the employees of Akzo. Last week, Elliott released an estimate of the amount of jobs that could be lost in Akzo Nobel standalone scenario. Elliott estimated the number of 6,400 redundancies. I was wondering, do you find that a realistic number?
Yeah, we responded to this last week. No, we do not think this is a realistic number. We think that it was quite a selective analysis. We've expressed that last week. Our plan is a plan of accelerating growth. That is something that certainly will provide employment opportunities as well. We believe that this analysis is something that we disagree with. I think we expressed that last week quite clearly.
Do you say anything about how many redundancies there will be in the standalone scenario?
We have provided a clear path forward in the 19th of April. We've clearly stated that it will be a continuous improvement plan. That continuous improvement we have proven in the last two years to provide cost takeout without significant restructuring, as well as growth, which has actually been accommodating new positions. We've been quite clear in the way we've described the plan on the 19th of April, and that's really what it is. Overall, from an employee perspective, as mentioned, we disagree with what we feel quite a one-sided assessment of the Elliott team or the consultant that they use. We believe that our plan certainly creates less uncertainty for stakeholders, including employees.
Thank you.
Last question comes from Mr. Sander van Mersbergen from Algemeen Dagblad. Go ahead, please.
Yes. Good morning.
Good morning.
I have two questions. First, about the phone approach you mentioned earlier on. Was this approach done by PPG, or did you make that approach? My second question is if you can say anything about the way forward, about the possibility of a hostile takeover, and if there will be one, how you will react to that takeover.
Well, again, I know that some of these processes are of extraordinary interest to some. During the review process, they contacted us, and on that basis, the parties mutually agreed to meet. When it comes to the possibilities of a potential hostile approach, I mentioned earlier in the call that the tonality has certainly not been friendly. The approach that they may or may not take going forward is pure speculation, and that is not something that we're going to do.
About that approach, well, you said the meeting was part of the review plan, and also for you, it was a good idea to meet. Would you have called PPG if they wouldn't have made that phone approach?
It's not relevant at this point in time anymore. We had the phone contacts that resulted in the meeting that we mutually agreed upon. The meeting for us has been a respectful and cordial meeting that has been beneficial. That's really what the situation is today, and now we look forward focusing on our plan for increased profitability and growth. That's really where our energy should go.
Okay. Thank you.
Thank you. Operator, we don't have time for more questions. If anybody has any more questions, please contact media relations. Further, I wish you a very nice day. Thank you.
Thank you very much. Bye-bye.
Ladies and gentlemen, this concludes the conference call. You may now disconnect your line. Thank you.