Talks are under way between the Amsterdam-based chemicals company and the American group but are at a very early stage, according to people briefed on the matter.
Shares in Axalta leapt 17.3 per cent to $33.25 on Friday following reports of the possible merger, first published by Reuters, giving it a market capitalisation of $6.9bn. Akzo Nobel has a market value of €19.5bn ($22.7bn).
An Axalta spokesperson said it would not comment on market speculation. Akzo Nobel said it “never respond[s] to market rumours”.
Akzo Nobel is the second-largest player in the $130bn global paints and coatings market, with balanced exposure to both main segments, according to research by Bernstein. Axalta is the fifth-largest and specialises in industrial coatings.
A tie-up would follow a wave of merger and acquisition activity that 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.
However, Friday saw the collapse of another deal — the proposed $20bn merger of Swiss chemicals group Clariant and its US rival Huntsman Corp — following opposition by an activist investor group that included Keith Meister’s Corvex hedge fund.
Akzo successfully defended itself against the unsolicited advances. But by refusing to enter into talks with its suitor, it angered a number of dissident shareholders, led by the activist investor Elliott Advisors.
However, Akzo’s chief executive, Thierry Vanlancker, has since abandoned a target to boost core profits by €100m this year set by his predecessor, Ton Büchner, as part of the defence against PPG. Mr Büchner left Akzo Nobel shortly after seeing off PPG, citing unspecified health reasons.
Another limb of Akzo’s plan to remain independent was a proposal to separate its speciality chemicals division, leaving a core business based around paints and coatings. The company says it is on track to complete a sale by next April.
A merger of Akzo and Axalta could create an entity with combined annual revenues of around $15bn, following Akzo’s planned disposal and assuming no further divestments are made.
Philadelphia-based Axalta was formerly part of the US chemicals behemoth DuPont but was rebranded after being acquired by private equity group Carlyle in 2013. It was floated the following year.