Ladies and gentlemen, thank you for holding, and welcome to the AkzoNobel Conference Call. At this moment, all participants are in a 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 Abrams.
Go ahead, please.
Thank you, operator. Good morning, everyone. It's Diana Abrams, Head of Media and Public Relations at AkzoNobel. Thank you for joining our media call this morning. I will hand over to our CEO, Tom Buchner, who will outline a few key messages before we open to Q and A session.
Over to you, Tom.
Thank you, Diana, and good morning to everybody on the call today. You will have seen the announcement this morning, so I will be rather brief. AkzoNobel announced today that after an extensive review, we're declining a third unsolicited nonbinding and conditional proposal submitted by PPG Industries on April 24, 2017, for all the outstanding ordinary shares in the capital of Oxonovell. AkzoNobel 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 AkzoNobel, working closely together with our financial and legal advisers.
We have tested the PPG proposal on 4 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, Anthony Berthons, Chairman of the Supervisory Board of AkzoNobel 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 2 focused high performing businesses, Paints and Coatings and Specialty Chemicals. And for the latter, we've already had banks appointed and are well underway with project teams to do the separation.
We remain confident that our strategy will build on the existing growth momentum within Occidental and create a step change in value creation for shareholders and all other stakeholders. With that, operator, I will be happy to take questions.
Operator, The first question comes from Ms. Ellen Proper of Bloomberg. Go ahead please. Yes, good morning. Thank you all for the next opportunity.
I'm wondering as PPG said in the statement, they came up with in response to Exelabell's statement this morning that Exelabell's care 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?
Well, the meeting was set up as part of the evaluation of the 3rd 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 meeting as beneficial. So overall, I guess the statement that we made this morning that you've seen 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.
And how did you enter into that meeting? Did you expect anything 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've certainly made it an integral part. But as we mentioned, it was a private meeting, and therefore, it would be inappropriate to provide details of it. But we went in with an open mind. We thought it was a core deal and a respectful meeting both ways.
But yes, details, of course, of a private meeting is something that we would think is inappropriate to disclose.
Okay. Thank you. Next question, Mr. Bart Koster of ABN Financial News. Go ahead please.
Yes. Good morning, Tom. We just received a statement of PPG themselves. And they stated that the AkzoNobelchairs stated upfront that they did not have the intent nor the authority to negotiate. So 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 the PPG is stating there?
We went in with an open mind. The meeting was set up as part of the review process of the 3rd proposal. We thought the meeting was beneficial. That was also the reason why we made sure that the meeting was there. And 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. So 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 2019. So from where we come from, this was a a and respectful meeting where we went in with an open mind.
Okay. But 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 perceived beneficial.
All right. Okay. And a second question is that what I missed in the statement to today's press release, I missed the words unanimously, which you used in previous press releases. 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 Board of the 2 boards, so to say?
Yes, Bart. The decision was taken unanimously by both boards.
Okay. Thank you.
Next question comes from Liam Bransma of Business Insider. Go ahead please.
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. So I'm trying to read in between
the lines here. And are
you saying that it might be a big problem for them to integrate ExxonMobil because they don't have an experience with such
a big takeover? And 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 Hellop of ASP News Agency. Go ahead please.
Good morning, Tom. It's Jan Henop from Jean Francois. I just wanted to ask you, this is dragging on and it looks more and more like a hostile takeover. Now you probably saw on Friday that Standard and Poor's issued a statement saying that AXA Noble ratings were placed on the credit and watch negative. And then 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?
And how do you deal with that pressure?
I guess the tonality has not been friendly, let's say, 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 and P side, we've always said that our aim is going to be a BBB plus company. We have been upgraded to A-, but we've always clearly stated that, that was not our stated aim.
That was just a situation that we were in and the evaluation of S and P at that point in time. We are still an A- with a negative watch. But again, it's aligned with our stated desire that we're looking for a strong investment rating, which would be around BBB plus in that. So for us, again, having designed both the paints and coatings and the specialty chemicals businesses that way, it is not a surprise to us and for us also not a negative sign because the A- was never an objective for us to be there. So that basically links back to the plan that we presented on the 19th April where you can see what we've been aiming at for the business of Paints and Coatings as a BBB plus business going forward.
So that's been the stated aim in that presentation. And therefore, the fact that S and P puts us as a negative watch is not something that is 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. Well, I guess if
you look at a process like it's been unfolding right now, I think you've seen clearly different tonalities in the way people have approached this. So we look back at this process, it's seeing that it certainly is one demonstration of a difference in culture. If you look at March 2 and you take the progression to today, this is not, I think, the way we'd have done things. And 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 2 significant sized 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. And therefore, from what we said, 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 Bergh of Life Equals. Go ahead please.
Didier Bergh, Les Deco, French Gaming. I was wondering following the meeting you had this weekend, apparently you didn't convince DVG that his offer was not good enough. I know you will not discover any content of that meeting. But do you think you have convinced PPG because you've issued this morning a very young press release, which seems to be convincing, but apparently, you're not very positive about that meeting. That's my first question.
And the second one is that what would you be expecting from the Dutch government following what we said last week that there should be more protection for Dutch multinationals? Thank you.
All right. As you yourself already indicated, indeed, for us, it was a private meeting where we will leave note that I will provide details. It was an integral part of the review. So we've felt it is truly important to have the possibility to listen carefully to what additions or possible modifications or potential changes to the proposal would be. We have not observed these.
We believe it is not our duty to increase and change the offer and kind of improve the offer on their side. We have been very careful in providing this meeting as part of the review process. So in that sense, I guess, I can only repeat myself in saying it's in our eyes, it was a beneficial meeting in terms of the things that they've described. Your question on the government, yes, the government is having discussions at this point in time. But 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. But as mentioned, business to business and politics is politics. Our discussion and our press release this morning is independent of politics.
Yes. Just a second question, Mr. Dovna. It's been said that maybe the government will extend the period, which will be able which should be a period of thinking about this offer. Do you think you'll be saved by such a matter?
Well, we'll there are discussions going on. We've got that in the newspaper as well. We will monitor that clearly. But that's really up to the politician. Our focus on energy is going to the plan, the plan to create 2 successful high performing businesses and accelerate growth and to provide increased cash returns to shareholders.
So that's where our focus is, but we are monitoring it in the newspapers closely.
Thank you.
Next question, Mr. Didier Bordeaux, Les Echols. Thank you. The next question, Mr. Aras Manscovy of Financial Times.
Go ahead, please.
Hi, there. It's Arash. Good morning. I guess my question is, having covered several of these kind of large complicated better huggy cross border deals, it's sort of unprecedented for me to see so many of the largest shareholders of the target companies speak out so publicly and in some cases so very little 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.
But how do you win these guys over? And how do you sort of maintain order in your shareholder base? Because I was 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 3rd proposal was received, we have been with shareholders on a multitude of continents. So we take the combination of what we hear from shareholders, advisers, 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. So 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. And I guess the other question that came up when I was researching the situation last few weeks was sort of how the Board and the management thought that their proposal, the April 'nineteen proposal had more visibility than the PPG offer? And sort of 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 or 4th is a clear increase of shareholder return. So when you're in a certain time point, for example, today, you can actually see the next time points of clear returns to shareholders. So 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 December this year, subsequently followed by a 50 percent increase final dividend in May 2018.
So in 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. And that part also, we've said that the vast majority of net proceeds will go to shareholders. So 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. And of course, there is additional risk and insecurity. So 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 Verbraeken of Financiel Daglop. Go ahead please.
Yes. Good morning, Tom. 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?
So we, as Board, felt that as an important part of the review, the meeting would be beneficial. There were descriptions where we felt explanations would be beneficial. And we do think it was a beneficial meeting. And as I said, we perceived it as respectful and cordial from both sides. So it has provided more clarity.
But the Board has decided that on the basis of the 3rd proposal, a meeting like this would be beneficial. And we confirmed that in our eyes it was.
But I understand it was beneficial, and I understand that the board decided it would be beneficial.
But why?
Well, because again, we have done the rounds both with our advisers, with both boards itself, with our talks to shareholders. And we looked at the 4 areas in terms of value certainty, timing and stakeholder considerations. And we're looking, of course, at the meaningfulness of the commitments and solutions that are customary in such transactions. And in the discussions, as said, we've understood some clarifications, but it failed to sufficiently address the shareholder concerns and the stakeholder concerns that we have rose, including areas around a regulatory environment. But we really felt that on the basis of the 3rd 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 3rd proposal, and we felt that it has been.
But why at the first two times, you didn't decide to go to talk? What was the difference?
Well, you've seen, I guess, the last proposal of PPG, which was provided on the Internet by them. And on the basis of the content of that proposal, we thought it would be good to have more clarity on the comments made. And 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 has been a phone approach and then a meeting was agreed upon by the parties. So that is what happened and that's really the detail, I guess, that we can provide. But parties mutually agreed to meet.
So there's not a one-sided initiative taker?
We mutually agreed on the basis of phone calls to meet, and that's what happened.
And 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. So we did not hear additional things there.
Okay. Thank you.
Next question, Mr. Derek Freinster from LTLJET. Please go ahead.
Good morning, everyone. Good morning, Mr. Bufner. 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 hear no additions, no modifications, no changes, so you didn't observe any of that.
But 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. So again, talking about expectations is we basically went in with thoughts on the 3rd proposal to see whether there were the meaningful commitments on customary major transactions, the ones that you see in the Netherlands, some 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.
And therefore, yes, we've listened open minded and carefully. But that doesn't mean that we've heard something significantly new on the topics I just mentioned.
You could just add that PPG says in the issue that they said it this morning that you asked on the belt 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 3 plus or maybe a 4th proposal, but you were not willing to talk about something else other than the 3rd one. So still coming back to my first question, what is open minded?
You're speculating on what may be in the meeting. And 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 3rd proposal. We have spoken about the 3rd proposal. Any speculation on that?
I mean, we have actually truly been and we still I mean, 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 who are dealing with each other during that meeting on Saturday.
How did the 2 parties lead the meeting, shaking hands?
It's an interesting question, but yes, we shook hands when we left the meeting as we did when we entered the meeting.
So cordial and respectful need. Okay. Thank you very much indeed.
Next question comes from Ms. Terri van der Heyden of NSF Handelsblatt. Go ahead please. Hi, good morning. I have a question regarding the employees of Akzo.
Last week, Alit released an estimate of the amount of jobs that could be lost in Akzo in the West End alone scenario. And Alit estimated the number of 6,400 redundancies. I was wondering, do you find that a realistic number?
Yes. 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. So we believe that this analysis is something that we disagree with, and I think we expressed that last week quite clearly.
And do you think about how many EBITDA will be in the standalone scenario?
We have provided a clear path forward in the 19th April, and we've clearly stated that it will be a continuous improvement plan. And that continuous improvement we have proven in the last 2 years to provide cost takeout without significant restructuring as well as growth, which has actually been accommodating new positions. So we have been quite clear in the way we've described the plan on the 19th April, and that's really what it is. So overall, from an employee perspective, as mentioned, we disagree with the what we feel quite one-sided assessment of the Elliot team or the consultant that they use. And we believe that our plan certainly creates less uncertainty for stakeholders, including employees.
Thank you.
Last question comes from Mr. Sander van Vesterbergen from Alfaite Duxplat. Go ahead please.
Yes. 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? And 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 1, how we will react to that takeover?
Okay. 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 style approach, I mentioned earlier in the call that the finality has certainly not been friendly.
But 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.
Okay. Okay. And about that approach, well, you said the meeting was part of the review plan, and it
was 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. And the meeting for us has been a respectful and cordial meeting that has been beneficial. So that's really what the situation is today. And now we look forward focusing on our plan for increased profitability and growth, and 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. And, Serta, 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.