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LONDON (Reuters Breakingviews) - Akzo Nobel has laid down an important brick in the wall of fortress Europe. The maker of Dulux paint thwarted a strategically and financially attractive takeover approach by U.S. rival PPG that was vociferously backed by many of the group’s investors – and did so without putting forward a convincing defence. It’s an alarming precedent.
The 25 billion euro deal’s undoing was partly down to the Netherlands, where Akzo is based. Companies there are legally obliged to take the interests of all stakeholders – including communities, employees and customers – into account when evaluating takeover bids. Akzo Chief Executive Ton Buechner argued that, regardless of the touted 50 percent premium to the target’s undisturbed price, a tie-up would be harmful for stakeholders – something that’s hard to disprove conclusively.
The idea that takeovers are about more than just striking a good price is not just a Dutch one. In February, Germany, France and Italy called on the European Commission to introduce new legislation that would make it easier to block non-European bidders. In her manifesto for the general election on June 8, British Prime Minister Theresa May is promising to tighten the country’s takeover rules. France’s resistance to a takeover of yoghurt maker Danone in 2005 once seemed like an absurd outlier, but that may be changing.
The Akzo saga shows how shareholders can lose out when non-financial, political arguments gather momentum. In the short term, this may secure the independence of future Akzos and Danones, and protect some European jobs. But if Akzo becomes emblematic of a new fortress mentality, the continent will pay a hefty price. A corporate landscape shielded from competition will eventually result in less efficient, sub-scale companies, and that should be the last thing politicians want.
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