Investor Artisan Partners is unhappy with Axalta Coating Systems’ plans to combine with AkzoNobel in an all-stock deal that will create a paint industry giant with an enterprise value of $25 billion.
“As an Axalta shareholder, we believe the only proper response to this proposed transaction is an absolute and resounding ‘NO,’” Artisan Partners fund managers Daniel O’Keefe and Michael McKinnon wrote in a letter to Axalta shareholders.
The pair said they would be interested in speaking with any other interested buyers.
THE DETAILS
- Artisan Partners wrote that Axalta’s decision to combine with AkzoNobel came out of the blue
- Axalta executives told investors on the third-quarter earnings call that it made sense to allocate all free cash flow to share repurchases, Artisan’s letter said.
- Axalta executives said they “expect to repurchase a significant amount of Axalta stock” based on management’s confidence in where the business can go in coming years.
- “We are confident that our pending merger with AkzoNobel represents the best alternative to drive substantial long-term growth and value creation for Axalta shareholders,” Axalta said in a statement.
- Axalta specializes in industrial and car coatings and went public in 2014.
- Previous deal talks with AkzoNobel failed in 2017.
- AkzoNobel CEO Greg Poux-Guillaume will become CEO of the combined company.
THE NUMBERS
- Axalta’s stock has dropped roughly 15% this year.
- Artisan is a small investor in Axalta.
- The Artisan letter said AkzoNobel’s “numbers speak for themselves. This is a company whose earnings and adjusted earnings per share are lower over one-, five- and ten-year periods.”
- AkzoNobel did not immediately respond to a request for comment.
