Artisan Partners is pushing back hard against Axalta Coating Systems’ plan to merge with AkzoNobel in an all-stock deal creating a $25 billion paint industry giant.
In a letter to shareholders, fund managers Daniel O’Keefe and Michael McKinnon wrote:
“The only proper response to this proposed transaction is an absolute and resounding ‘NO.’”
They added they would welcome discussions with other potential buyers.
Key concerns raised
- The merger proposal “came out of the blue.”
- On the Q3 earnings call, Axalta executives said all free cash flow should go to share repurchases, reflecting confidence in future performance.
- Management previously said it planned to repurchase a significant amount of Axalta stock.
Yet Axalta defended the merger, saying it will drive long-term growth and value for shareholders.
Deal background & numbers
- Axalta, a leader in industrial and auto coatings, went public in 2014.
- Past merger talks with AkzoNobel collapsed in 2017.
- AkzoNobel CEO Greg Poux-Guillaume will lead the combined company.
- Axalta shares are down ~15% YTD.
- Artisan Partners is a small investor, but argues AkzoNobel’s “numbers speak for themselves,” noting its earnings and EPS are lower over 1-, 5-, and 10-year periods.
AkzoNobel did not immediately comment.