Axalta investor Artisan Partners urges rejection of AkzoNobel deal

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By Svea Herbst-Bayliss

NEW YORK (Reuters) -Investor Artisan Partners is unhappy with Axalta Coating Systems’ plans to combine with AkzoNobel in an all-stock deal that will create a paint industry giant with an enterprise value of $25 billion.

“As an Axalta shareholder, we believe the only proper response to this proposed transaction is an absolute and resounding ‘NO,’” Artisan Partners fund managers Daniel O’Keefe and Michael McKinnon wrote in a letter to Axalta shareholders.

The pair said they would be interested in speaking with any other interested buyers.    

THE DETAILS

* Artisan Partners wrote that Axalta’s decision to combinewith AkzoNobel came out of the blue * Axalta executives told investors on the third-quarterearnings call that it made sense to allocate all free cash flowto share repurchases, Artisan’s letter said. * Axalta executives said they “expect to repurchase asignificant amount of Axalta stock” based on management’sconfidence in where the business can go in coming years. * “We are confident that our pending merger with AkzoNobelrepresents the best alternative to drive substantial long-termgrowth and value creation for Axalta shareholders,” Axalta saidin a statement. * Axalta specializes in industrial and car coatings and wentpublic in 2014. * Previous deal talks with AkzoNobel failed in 2017. * AkzoNobel CEO Greg Poux-Guillaume will become CEO of thecombined company.

THE NUMBERS

* Axalta’s stock has dropped roughly 15% this year. * Artisan is a small investor in Axalta. * The Artisan letter said AkzoNobel’s “numbers speak forthemselves. This is a company whose earnings and adjustedearnings per share are lower over one-, five- and ten-yearperiods.” * AkzoNobel did not immediately respond to a request forcomment.

(Reporting by Svea Herbst-BaylissEditing by Rod Nickel and Stephen Coates)