Elliott Advisors loses legal bid to unseat Akzo Nobel chairman

In his ruling, Judge Makkink said that while he didn't doubt Akzo Nobel's management, it and the company's board should find a way to normalize relations with shareholders and be more accountable to them on why PPG's offers were rejected.

But Akzo dismissed the request, saying it did not meet "standards of reasonableness and fairness" under Dutch law and was not in the company's best interests.

A Dutch court has ruled in Akzo Nobel's (OTCQX:AKZOY) favor, declaring the paint giant was within its rights to not enter talks to be taken over by PPG.

A Dutch court Monday threw out a bid by a group of shareholders of AkzoNobel to force the holding of an extraordinary meeting aimed at trying to oust the chairman of the world's leading paintmaker.

Elliott said in a statement it was "surprised and disappointed" by the ruling.

Under Dutch financial laws, PPG has until Thursday, June 1, to decide whether to mount a formal bid for AkzoNobel or walk away for a six-month "cooling-off" period. Shareholders may now be less likely to invest in the country with such limited rights.

Elliott can appeal the decision to the Dutch Supreme Court.

PPG's chief executive Michael McGarry said last week the company preferred to negotiate a multi-billion-euro takeover of AkzoNobel, rather than mounting a hostile bid.

"The ruling has reduced the likelihood of a combination with PPG, leaving only a hostile bid as the way going forward", said ING Bank analyst Stijn Demeester, adding that Akzo Nobel's anti-takeover defense mechanism would result in "significant risk" for PPG.

"But without productive engagement, PPG will assess and decide whether or not to pursue an offer for Akzo Nobel", it said. The acquiring company also doesn't have the benefit of due-diligence on the target company's operations that is typical in friendly transactions.

The petition was led by Elliott Advisors, the hedge fund that holds a 3 per cent stake, and was backed by investors owning 18...

But that prospect still may not be enough of an incentive because Akzo's corporate structure could allow a group of current directors to thwart a takeover, even if PPG won over investors to complete a deal.

PPG has previously showed an unwillingness to launch a hostile bid against its rival.

  • Zachary Reyes