Elliott Management Takes On Akzo Nobel NV

USA-based activist investor, Elliott Management Corp has just asked for a Dutch court to force Akzo Nobel NV to assemble a special meeting with shareholders in order to start the removal process of its chairman. This is just the latest move to overpower the paint maker into talking about a merger with rival PPG Industries, Inc.

On Tuesday, the company said it filed a petition with the Dutch business court—the Enterprise Chamber—to encourage shareholders to vote for the dismissal of Antony Burgman. The company argues that Akzo’s supervisory board chairman did not “discharge his fiduciary and corporate governance duties,” when the Amsterdam-based company rejected PPG’s most recent takeover request, on Monday; a request which improve the offer to EUR24.6 billion (approximately $27.1 billion USD).

Corporate lawyer Martijn Kesler comments that taking this legal action could be the first signal that many foreign companies are underestimating the power that Dutch company boards actually hold.

The AMS Advocaten attorney, while not involved with the case, argues: “The Enterprise Chamber tends to rule against activist shareholders as long as the board acted in the corporate interest. Based on some earlier key rulings by the Enterprise Chamber, Dutch company directors simply have a huge discretionary power to act.”

Now, the paintmaker argues that Dutch law allows its board (and all others, essentially) to refuse to put a motion for a vote before shareholders for any of a number of reasons. These reasons can, in fact, include that the motion is focused on changing strategy or actually goes against “reasonableness and fairness.”

In the statement, Elliott continues: “Akzo Nobel’s boards continue to demonstrate a disturbing and inexplicable tendency to act in their own, self-entrenching interests and against the interests of shareholders and other stakeholders.”

Elliott goes on to comment that its reasons for declining the PPG proposal (this is now the third attempt) are “unconvincing and unsupported by any available evidence.” The statement argues that Akzo’s supervisory board—under Burgmans guidance—has “failed to fulfill its corporate governance duties by refusing to obtain, through constructive engagement with a credible bidder, the necessary information required to fully evaluate a bona fide proposal.”

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