I'm hoping the following report from the Herald Sun is correct and there is at least one other bidder lining up to have a crack at Wattyl.
War looms for Wattyl
George Lekakis From: Herald Sun June 29, 2010 12:00AM
Takeover target: Wattyl paint looks like sparking a bidding war.
A TAKEOVER war is set to erupt for local paint maker Wattyl, with Dutch giant Akzo Nobel believed to be preparing a rival bid.
Institutional investors yesterday bought up Wattyl shares on expectations that Akzo Nobel and possibly US paints rival PPG were poised to trump the $142 million offer from the US-based Valspar Corporation.
Wattyl's board has decided to recommend the Valspar bid, which values its shares at $1.67 each.
Hedge funds were believed to be among the buyers of Wattyl scrip yesterday as 1.6 million shares changed hands. Wattyl stock closed 35 up to $1.61.
It was the biggest trading day for Wattyl since March last year.
Senior industry sources told BusinessDaily that Akzo Nobel had been trying to gain a foothold in the Australian and New Zealand paint markets for more than a year by buying Orica's Dulux-branded paints business.
However, strategic talks between Akzo and Orica collapsed over a "strident disagreement on valuation".
Akzo Nobel owns the global rights to distribute Dulux products globally except for Australia and NZ - where Orica retains ownership.
"There is a strategic logic for Akzo wanting to acquire the Dulux business in Australasia, but Orica has been playing hardball on price," said a respected industry source.
"The worry with Dulux is that the business has probably peaked in terms of market share, so there is an incentive to look more closely at the Wattyl option."
Akzo has plenty of time to mount a bid for Wattyl, with shareholders not scheduled to vote on Valspar's proposal until September 8.
While Dulux has crunched competition from Wattyl and Japan's Nippon Paints in the interior paints market in recent years, it has been less successful in reducing the sales of Wattyl's premier outdoor paint brand, Solagard.
Any Akzo move against the Valspar deal could have supply implications for Woolworths' planned rollout of a national hardware chain.
Valspar has a strategic partnership in the US with hardware giant Lowe's, which is partnering Woolworths on its push into the local hardware market.
There is heavy speculation in the hardware industry that Woolworths and Lowe's may try to negotiate an exclusive distribution deal for Solagard if Valspar acquires Wattyl.
Such a deal would put the Wesfarmers-owned Bunnings business in a weak bargaining position with Orica over wholesale pricing for its Dulux, Berger and British Paints products.
However, that may not be the case if Akzo Nobel acquired Wattyl because it has no existing ties with Lowe's or Woolworths.
Akzo would probably want its products to be distributed through both retailers.
Orica's dominant position in the paints market has allowed it to extract big profit margins in distribution deals struck recently with Bunnings and other hardware chains.
The battle for control of Wattyl will be followed closely by the Australian Competition and Consumer Commission, which three years ago blocked a takeover move on Wattyl by South Africa's Barloworld, which at the time owned the Taubmans business since sold to PPG.
WYL Price at posting:
$1.62 Sentiment: Buy Disclosure: Held
