Breakingviews – Akzo’s Finnish paint splurge isn’t like Rembrandt’s

LONDON (Reuters Breakingviews) – For most people, “Holland” and “paint” mean Rubens, Rembrandt or Vincent van Gogh. Looking to splurge 1.4 billion euros on Finnish peers Tikkurila, aggressively attacking the US-based PPG Industries rival, Amsterdam-registered Akzo Nobel shows very little of the grace or finesse of the Dutch masters.

Akzo Nobel’s offer of 31.25 euros per share for Tikkurila, which has a strong position in the Scandinavian market for decorative paint and coating, is 13% higher than the 27.75 euros that PPG revealed two weeks ago. Both fighters have a history: in 2017 Akzo halted the Pittsburg-based group’s attempt to buy it with the support of Dutch unions and the government.

Akzo Nobel President Thierry Vanlancker will find it difficult to show such generosity to Tikkurila shareholders in a favorable light. Its offer values ​​the Finnish company at some 16 hours 2021 EBITDA, according to Refinitiv forecasts. His own company, worth 17 billion euros, trades on just 11 hours. And Tikkurila’s expectations don’t justify a headline valuation: earnings growth are unlikely to be expected over the next four years, Refinitiv data show.

Tikkurila is likely to generate 62 million euros of operating profit next year, according to Refinitiv estimates. After tax, that would represent a 4% return on Akzo’s 1.4 billion euro spending, far below the 5% weight average capital cost estimated by New York Stern University for Europe’s specialty chemicals department . To date, the Dutch organization has failed to define any cooperation, and potential savings will be reduced.

It is possible that Vanlancker is trying to make up for it to prevent another attack with a $ 34 billion PPG. In that regard, the 2% decline in Akzo’s share price on Monday – saving 340 million euros of market value – is quite fruitful. However, his move could work out whether PPG has been tricked into making an even bigger mistake. Shares of Tikkurila jumped 17% to 32 euros on Monday, suggesting investors believe the U.S. group could still raise their price. That could bring humiliation to its shareholders, leaving Commander Michael McGarry tied up with expensive construction across the Atlantic. Vanlancker’s false splurge could become a masterpiece.