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Dutch paintmaker Akzo Nobel and its US rival Axalta Coating Systems have terminated talks over a multibillion dollar merger after failing to reach an agreement.

The two companies confirmed they had ended discussions over a possible combination that first became public in October. That came just months after Akzo Nobel fended off an unwanted €27bn takeover approach from PPG Industries, a larger US competitor.

A deal between Akzo and Axalta would have brought together the third and fourth-largest players in the $130bn global coatings market, according to analysts. Coatings are used to protect surfaces from corrosion and wear in a wide range of industries, from large seafaring vessels to mobile phones.

“We concluded we could not negotiate a transaction on terms that meet our criteria,” said Charles W. Shaver, Axalta’s chairman and chief executive. “Any transaction we ultimately agree to needs to generate superior long-term value for Axalta shareholders as compared to the continued execution of our strategic plan.”

A wave of merger and acquisition activity has radically reshaped the wider chemicals industry over the past few years, as companies have sought greater scale and cost savings at a time of weak demand growth.

Akzo’s flirtation with Axalta was seen by some partly as a way to deter PPG, which under Dutch takeover rules can table another bid in December when a six-month “cooling-off” period expires. The talks centred on a possible combination of Axalta with Akzo’s paint and coatings division.

Axalta added that it would continue to pursue “other value-creating alternatives”.

Both parties had sought to characterise the negotiations as focused on a “merger of equals”. However, this would have likely been complicated due to the gulf in size between the two groups. Akzo’s decorative paints and performance coatings divisions together had sales of €9.5bn in 2016, while Axalta’s total revenues were $4.1bn.

Amsterdam-based Akzo Nobel meanwhile said it was on track to separate its speciality chemicals division and return the vast majority of proceeds to shareholders, a decision that was taken as part of its defence against the advances from PPG.

The company added that it was committed to achieving its increased financial targets, which were also laid out as part of a rearguard action against PPG.

Thierry Vanlancker, chief executive of Akzo Nobel, said: “I am confident that our strategy offers significant value for shareholders and other stakeholders in the short, medium and long term. We remain focused on our strategic options to continue to develop our business and improve profitability in the future.”

Axalta shares initially tumbled as much as 16 per cent to $28.50 in after the US market close on Tuesday before reversing those losses to trade 4 per cent higher.

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