Akzo Nobel, the paint maker based in the Netherlands, has come under heavy pressure after rejecting a very lucrative takeover offer as well as releasing two warnings on profit.
However, the company confirmed that it is holding merger talks with Axalta Coating Systems, a small rival based in the U.S. to create a company worth $30 billion.
Akzo makes Dulux paint and announced it was holding constructive talks over a merger of equals for what could be the first major deal for CEO Thierry Vanlancker, who took the reins in July after the company spurned a takeover over of €26 billion or $30.2 billion from PPG Industries its big rival in the U.S.
A report on Friday said that Akzo approached Axalta over the two merging, which sent shares of Axalta up more than 17%.
Akzo made certain to stress in a short statement that the current talks are not going to affect its decision of selling the Chemical Division it has that is valued at between €8 billion and €10 billion. It is confirmed it would return the overwhelming majority of the proceeds to its shareholders.
Akzo’s market capitalization is €19.5 billion or $22.7 billion, while Axalta is worth over $8.1 billion as of the close of business on Friday.
Akzo said that merging with its U.S. rival, whose business of truck coatings would fill a hole in the Dutch paint maker’s portfolio, would make a leading paint and coatings global company.
CEO Vanlancker was forced to cut the targets made due to pressure from the takeover battle on two occasions over a period of just six weeks. He blamed the disruptions from Hurricane Harvey, the rising costs of raw materials and headwinds its marine coatings segment is facing.
Akzo faced lawsuits in earlier 2017 from its shareholders who were angry over the company’s decision not to accept the PPF takeover bid.
Shares of Akzo were down 0.7% in early trading across Europe Monday morning.
One industry analyst said that the deal was a sensible one, combining the No. 3 and No. 4 companies in the industry. The new entity would trail U.S. based Sherwin-Williams/Valspar and PPG globally.
The merger would also improve density and scale in segments as well as countries where need and at the same time cutting costs, most likely in Europe as well as in its fragmented general industrial area.
The two companies forecast total savings of nearly €250 million from the combining of the two operations.