Tikkurila Oyj (AKZA) Earnings Call Transcript & Summary

Hello and welcome to the AkzoNobel Investor Update Call. [Operator Instructions] Today, I'm pleased to present Lloyd Midwinter. Please go ahead with your meeting.

Hello and welcome. I'm Lloyd Midwinter, Director of Communications and Investor Relations at AkzoNobel. Today, our CEO, Thierry Vanlancker, will briefly outline AkzoNobel's recent announcement and then take some time to answer your questions together with our CFO, Maarten de Vries. For additional information, please contact AkzoNobel investor relations.

Thank you, Lloyd. Thanks for joining, everybody. First of all, best wishes for the new year in 2021. And hopefully, things normalize on the pandemic area during the year. So definitely stay safe and stay healthy. As you've seen today, we made a proposal to acquire the Finnish company Tikkurila and creates thereby a superior and sustainable value for all stakeholders. The proposed combination of the 2 companies would create a very strong platform for future growth in that subregion, be better able to serve the customers with more innovative and sustainable solutions and also building very much on a northern European heritage. The proposal of EUR 31.25 per share or around EUR 1.4 billion represents a premium of 113% to Tikkurila's volume-weighted average share price for the undisturbed 3-month period ending December 17, 2020. And it is 13% higher than the current offer that was made on January 5, 2021. The natural combination of AkzoNobel and Tikkurila would build on centuries of industry experience in both companies to create a really significant value for customers, employees, shareholders and all stakeholders. Bringing together our premium decorative brands and leading portfolios would really provide customers with a wider range of innovative products and services, including the most sustainable paint and coatings solutions out there. To obtain merger clearance and ensure deal certainty, we have agreed with Hempel key terms for the sale of assets, including our Decorative Paints business of AkzoNobel in the Nordics and the Baltics. The Nordic culture and the strong presence of Tikkurila in Finland would continue to be reflected also in our combined organization. The main offices and production facilities of Tikkurila in Finland would become the vital hub in the Baltic Sea region, and substantial investments would be made in production facilities to supply future growth. Employees and management would benefit from new and exciting career and professional development opportunities in Finland and the wider organization, all within a European company context. AkzoNobel and Tikkurila have a common approach of -- to sustainability. It's embedded in the way we operate on both sides, and we are widely recognized as the leader in the paints and coatings industry also on that front. Joining forces would build on the sustainable purpose of Tikkurila and continue to make a difference for all stakeholders, including local communities. Our complementary geographic profiles would create superior value compared to any other combination, including growth opportunities for the company and its employees. And our collective procurement capabilities, expanded production and combined sales and distribution channels would deliver substantial value creation. The transaction as proposed is expected to be EPS accretive in 2022. It is aligned with our capital allocation priorities we indicated later -- earlier and will be financed using existing cash and credit lines. We will continue our current EUR 300 million share buyback program and maintain our target leverage ratio of 1x to 2x net debt over EBITDA. AkzoNobel and Tikkurila would have an exciting and sustainable future together, continuing the recent positive momentum and performance improvement as a global front-runner in the industry. Maarten and I would hereby be very happy to answer all of your questions. Operator, please start the Q&A session.

[Operator Instructions] Our first question comes from the line of Gunther Zechmann from Bernstein.

Can I just ask 2 questions, to start, please? One is on the antitrust side. On the deco side, it seems pretty straightforward. On the industrial paint, 17% of Tikkurila's sales, do you expect any concerns on the wood industry and on the protective coatings where you'd also have to make some divestments? And then the second one, you say you expect the deal to be EPS accretive by 2022. Can you share the assumptions that you use in your merger models or acquisition models to get to that equation, please? And can you also comment what it means for deal ROIC?

All right, Gunther, thank you for your question. The answer on your first one, around are there any potential antitrust issues on the Performance Coatings side, the answer is no. It wouldn't change any of those positions, so that is not an issue that we have to deal with. So it's a short answer, but I think it probably answers your question. Two, on the EPS accretion. Before I hand it over to Maarten to get you there, I just want to put a context of the offer here. If we look at alternative combinations versus an AkzoNobel-Tikkurila, there is 2 sets that we have to look at. One, since we do take the measures on the -- that would allow high deal certainty, it's mostly situated or it's all situated in the -- what is -- Tikkurila calls their region west. So that's the Baltics, the Nordics, as we have announced. There we would have the optimization similar to what other offers could be making. It's around the raw materials. It's around the embedding in our SAP for HANA, which is together with the SAP platform from Tikkurila. It's the normal efficiencies. There is actually -- since Tikkurila has a pretty nice logistics setup in Scandinavia and the Nordics but also in the Baltics, it would also basically enable part of our Performance Coatings to go to that channel. So in that sense, it's pretty similar. What we're very excited about is the other 50% of the company that is basically countries outside, I would say, the Nordics and the Baltics where we do have very strong combinations either by having smaller market positions of Tikkurila being embedded in our significant market position. So that gives immediate efficiencies similar to what we've seen with Fabryo in Romania or Titan in Spain, et cetera. So there, in fact, we not only have the, I would say, traditional ways of creating value, but it is really market-wise, offering-wise, how we task the joint production facilities we have. There is actually significant step-up. So that actually has been the background of the calculation, which has really been very, very disciplined here, but Maarten, you can probably address specifically the EPS question.

Yes. So to build on what Thierry said: We've spent ample time to really detail out the business case for this potential transaction, indeed looking at the -- on the one hand, the overlaps and the antitrust, potential antitrust issues, which Thierry just mentioned, but also the potential value creation and the potential efficiencies and leveraging indeed our systems, our processes but also the grow opportunities in the different products and distribution channels. So from that perspective, I think there are 2 areas to look at. It's indeed the EPS accretion as just mentioned but also the overall value creation. And if you look at the value creation, we believe that from a midterm perspective, and that is kind of in the 3- to 5-year period, this is value creative for us. And so -- and maybe to add maybe from a multiple perspective, because it will come up probably also in the call: From a multiple perspective, if we take the total business case including the potential synergies and -- we see that this deal is below our current AkzoNobel multiple.

Does that answer your question, Gunther?

Maybe you can comment on the deal ROIC as well, please.

On the what? On the...

The return on capital...

[indiscernible].

Yes. On the return on capital, that is just what I mentioned. So from a midterm perspective, the 3 to 5 years, we see this as value creative. So we basically looked at all the different areas, from a multiple perspective; from a value creation perspective; of course, a DCF perspective, to work this out in highly detailed level.

And the next question comes from the line of Peter Clark from Societe Generale.

Clearly a rarity value with this sort of asset, but I'm just wondering. Your multiple has now pushed up beyond Valspar, close to Dulux group, I think, higher on an EV-EBIT. So clearly a lot of this is going to be about growth. Because I think you've indicated on the cost savings you get raw materials, a bit of overlaps, but this is more about a growth story. I'm just wondering if you can go through how you see the growth here perhaps overlapping with your Performance Coatings portfolio, obviously with the emerging markets exposure, et cetera. So more on the growth side.

Yes. Peter, thank you very much, but I have to correct you here. There is really no rarity value that we put in there. It is really a very dry spreadsheet on what we really see as clear -- not just made-up but clear efficiencies we see in the logistics. Hopefully, the answer on the previous question made it clear that for, I would say, about half of the revenue of Tikkurila, we should be able to make a similar offer as anybody else. We do have much more of our Performance Coatings that in the Nordics and the Baltics would benefit from having a stronger local presence there, also in the warehousing, logistics, et cetera. So that's it, but if you go to the other 50% of what is currently Tikkurila, I would stand -- I would actually want to correct you that this is not only based on overenthusiastic growth situations. It is actually around really [ dry boring ] the pretty obvious efficiencies. Russia is being a good example of that, the China business. I mean we talked about 50% of the business that really drives to efficiencies. And therefore, again, this is not around trying to outbid anybody. This is not around a rarity value. This is really a dry spreadsheet that gets us there. And hopefully, in the last [ few ] years, we made it sure that -- or we made it clear that is how we take the decisions. This is not around size or anything. But talking about the growth opportunities, I'll give a couple of examples. First of all, if you look at the Nordics and the Baltics, first of all, Tikkurila has a very strong position there. We have good positions there, but obviously they have higher market shares, and therefore that allows much more ways to actually have other parts of our offering, our distribution Wood Coatings business, for example, to go along, where we have a strong position in other parts of the globe. But if you then go to -- and I'll give just some concrete examples. Tikkurila have a pretty nice positioning for a small part of their portfolio in China, but it is as a premium brand. That goes completely alongside. Its product that actually gets distributed over thousands of miles before it gets to China, but we have a big organization. We're alongside. We have production facilities in -- numerous production facilities in China. So that's a clear, if you want to talk about, growth opportunity. The same is in Russia, sizable country where we have very good qualitative business; and we see the same, in fact, for Tikkurila. If you now can put in the distribution channels, the sales channels, that combined offering, you really get, first of all, in -- a much more efficient spread across a huge country, but you also can just tailor your offerings much more to medium, premium, et cetera. So these are -- I can assure you these are not just wishful thinking because we want to grow because it doesn't necessarily such a big growth add to the company. It really, for us, is similar as what we did with Fabryo in Romania or the other acquisitions we did. In some of these regions, we may be the bolt-on. Or they may be the bolt-on in us and hence create much more value. We do believe there is going to be growth, but it's actually much more based on demonstratable operational efficiencies in that whole area. Does that answer your question?

Yes. You made it very clear on the cost side. Can I just ask a specific question? Would raw material savings be the biggest part of that cost side, or would you think other things together would be at least as big?

I think the raw material efficiencies would be a good part of it, but there are significantly more. I mean again I want to point out we have systems that are now completely compatible. I just want to point out that, for the whole region that we talk about here where Tikkurila is operating in, we actually went months ago to SAP for HANA, so we have the most unified but also the most advanced system. Logistics is a very big part of it. Transporting to difficult geographies and big geographies is another -- a big other part of it. So I would say rather probably half-ish of what I would see as efficiencies but not much more than that.

The next question comes from the line of Charlie Webb from Morgan Stanley.

Just kind of following up on the ones that have been asked, but is there any chance you can provide some sort of scale of the proposed asset that you would look to divest, just kind of order of magnitude maybe, maybe at a sales level? And then maybe second question, just around synergies: As we think about -- as you laid out, obviously a very complicated process, lots of different moving parts that come into this, but how -- again, what order of magnitude, the type of synergies would you expect from such a deal? How does this compare to other coatings deals? And then lastly, just on that cost of capital, returns question at the start of the call, just over what time period did you say it would be value accretive? Is it 2 to 3 years? Just clarify and that would be great.

All right. So let's start tackling the questions one by one. And then Maarten, you may comment on the last one. On the size of the divestiture, we would actually prefer not to comment on that because, frankly, it is dependent on a variety of scenarios. And it's also, I think, would not be fair. This is actually between the Hempel company and us, so it would not be fair to give details at this specific time. I'm sure that you can do your triangulation to get a feel for it, but it's obviously different scenarios, so I would actually decline to comment on that. On the synergies, you talked about the synergies for the deal from us particularly, I presume, Charlie.

Yes, yes, that's -- particularly, yes, the kind of as a percentage of sales or some sort of order of magnitude.

Well, I think I wouldn't necessarily go to percentage of sales, but I hope that the description I gave in the answer on the previous question said that the baseline would be the same for any other offer that would come in, but in addition to that, for about half of the revenue for Tikkurila, and I described it "in the countries that are outside of the Nordics and the Baltics," we are obviously the ones that can create much more value. And this is around efficiencies or whatever you want to call it, so I will decline to give a percentage on that since we're still at the very early phase in this process. But I can assure you, and then I'll hand it over to Maarten, that if we walk to that -- and this is not just stuff that has to go from one region to another. If we just look on the ground, our business case makes a lot of numerical sense, as we brought forward. And by the way, we will only be engaged in this as long as it makes numerical sense for us, just as a caveat upfront. Maarten, you maybe want to...

And on your question on value creation, and I mentioned it earlier. We -- basically the value creation aspect is in the midterm, and you should think of a period of 3 to 5 years.

Charlie, does that answer your questions?

Yes, that's fair. Well, just maybe one following up on that point you just mentioned. You'd stay in the process as long as it made financial sense. What are your expectations here? Clearly, it seems like there are potentially multiple parties involved. And I know specifically obviously your price now comes in ahead of PPG's second raise offer. Do you expect this process to continue to be competitive? Or do you think you offer enough in terms of, as you say, perhaps that it's not just financial that makes it more attractive to Tikkurila and their shareholders?

Charlie, I think we made a rational offer. Besides all the soft elements, it's a very, very rational financial offer for us and, we believe, for Tikkurila. By the way, Maarten would not allow me to do anything that smells like irrational. That also means that we very much know what the value is of the asset for us that we can create real, so not just fluffy, stuffs that we have around it. And we will be engaged in the process unless -- that continues to be true. And then it's actually up to Tikkurila and -- on how they position themselves around it.

And the next question comes from the line of Mubasher Chaudhry from Citi.

Just a quick one on your comments around Tikkurila's position in China. Is that large or sizable enough to kind of push you up the rankings within China for your market share? Or is that quite a small position compared to your own position? So just some context around either your position or their position and how that kind of moves your footprint within China. That color would be really helpful.

Well, I think we probably have to see the more detailed data we assess. It's actually a mid-single-digit percentage. It's -- but it is a high-premium offering they have. And it is an offering, of course, that fits completely alongside our product, so in that sense, it would be for us a very convenient and a very value-creating addition to the portfolio, but I don't think it would necessarily change the rankings in China. It would probably be a nice addition to the already very high value of our China business in there, but it wouldn't change the ranking there. Does that answer your question?

Yes. And just another one, on the kind of the timing. Did -- were you looking at Tikkurila as a potential acquisition pre the PPG bid? Or was it the PPG bid that kind of started off the -- started the process internally to kind of carry out your own numbers and make the bid? I guess I'm just -- were you aware of that they were up for sale pre the PPG bid?

Well, of course, as you might imagine, we've had over the past -- I mean we have very regular contacts with the Tikkurila organization there. There was always a stark interest. The feeling was, until pretty recently, that they were not necessarily contemplating a strategic change for the company. We knew -- despite having had the obvious attraction for what the value creation would be, we knew we had a deal certainty issue if it ever came up given our positions in some of the markets where Tikkurila is active in. So frankly, when we saw the PPG move, who in fact has no overlap and therefore maybe also a value creation deficit, we went to work to see how can we -- we should be the better owner for this asset, that we should be able to create significantly more value from the combination. And that's when we went to work to find a solution for what was our -- probably our Achilles ankle in this whole thing, which is the deal certainty. And so we were able to resolve that, but if your question is were we involved in that whole process as it unfolded: We saw the first offer being made. Then we saw a second, increased offer. We were not involved in that at all. So we were busy doing our homeworks to make sure that we could come with a credible offer, and we were not involved in any intermediate steps there.

And the next question comes from the line of Laurent Favre from Exane.

Two questions, please. The first one, Thierry, is on Poland. I'm surprised that everybody seems to assume that the deal is an easy one on antitrust as, I believe, you're bigger than PPG in Poland. So can you maybe comment there on the way you think about the antitrust or the way you think the EU will think about antitrust? And the second question is on the M&A pipeline more generally. I guess now we have to wait whether -- well, what the board does at -- on the Tikkurila side. Can you maybe talk about how you're looking at the pipeline otherwise beyond Tikkurila in terms of other bolt-ons or bigger bolt-ons? I think you qualified Tikkurila being a big bolt-on.

On the Poland question, Laurent. If I'm well informed, the position of PPG and us is about the same, I would say, in Poland. And we would not talk about being able to assure high deal certainty if we hadn't had analyzed that very thoroughly and found ways to deal with it. So I think there we feel pretty comfortable around it. Maarten, maybe you want to talk about the M&A pipeline.

Yes. So as you know, we are pretty active to look at potential bolt-on targets, and then what you said is right. This is kind of the -- at the upper limit of our bolt-on targets in terms of size. We just closed a deal in North America with our yard business. We are this quarter basically in the process of closing the Titan business in Spain, and we still have quite a pipeline of possible bolt-on opportunities. As you know, we have kind of mapped out for ourselves in our different performance cells where are the possible white spots or where the possible opportunities are. And this is kind of the focus we give on our bolt-on pipeline. And in fact, the interesting thing is that this offer for Tikkurila is also really in the sweet spot of -- for our deco EMEA business in one of our strategic mandates, so it very much fits in our bolt-on strategy and our bolt-on pipeline. So it is very much in the context of what we have been looking at and what we have been busy with.

And if I -- if you allow me, Maarten, to build on that. I think this is the -- our motive for making this proposal is really in the same spirit as what we did in Romania, what we did in Spain over the last few years. It's really deepening our market positions in those markets and creating efficiencies, so this is not driven by size. It's not driven by anything else. It's -- really it's a big one. It's a bigger bolt-on, I would say, but it's really driven with the exact reason of how can we deepen the profitability and the return of the countries that we operate in. So it fits completely in that. Does that answer your question, Laurent?

Yes. And if I sneak in a last one: I understand you don't want to talk about profitability at the country level, but if -- could you -- once we've done the triangulation on sales of the Hempel package, can you maybe give us a hint on profitability of those assets to be disposed off compared, for instance, to your deco margin globally or to Tikkurila's reported margins?

I would say, Laurent, indeed you're right. We don't give that information, but those countries are in the similar profitability as the rest of the deco EMEA business.

And the next question comes from the line of Alex Stewart from Barclays.

A couple of questions, but can you talk about needing to put some investment into the assets once you've acquired them? Can you possibly try and quantify what sort of CapEx would be required there? Secondly, if you -- if the deal completes and you acquire and consolidate Tikkurila, what are the 2 or 3 metrics, financial metrics, Thierry and Maarten, that you would look at that you think best track the success of the deal over the next 3 to 5 years? And then finally, I know this has been kind of asked already, but Tikkurila has traded below EUR 20 for several years now. So what was the reason that you didn't make an approach in the past and instead waited until -- taken other bidders to push the price up to announce your intention? Any color or additional color, that's fine too.

Yes. Thanks, Alex. Maybe I can take the first question and the last question. And then Maarten, you can talk about the metrics. On the investments, for us, in fact, in those geographies we're doing actually quite well. So to be honest, a lot of the investments that we have indicated are investments we could probably do on our own, in our own infrastructure. So I think this fits. The investments would probably be -- and I've alluded to that. If I take places like Russia for example: Tikkurila has assets. We have assets. And this is both on manufacturing but also on logistics, et cetera. So now all of us [ make it in spot ]. And then Russia is a gigantic country. So in fact, if we can just make sure that we use the assets in more rational way, if we use the warehouses in a more rational way or rationalize the warehouse network, this obvious -- and that -- but that often comes with investments. Also, if you do some changes in raw materials, you often have to do some investments. So I think it sits in the category of making sure that the hardware and the assets really fit and actually that we have much more flexibility between the two. The same is for our -- if we have a much more dense market position, then of course that allows some really logistical and production optimizations also with some of our Performance Coatings products that we distribute in those regions pretty heavily. I think I've alluded to that in previous calls, that the Nordics is a very interesting region, but frankly it's a big geography, so if you don't get to a certain critical mass of market position, you kind of get -- or you lose a lot in just getting stuff from A to B. And then if you count in Russia, that's definitely the case. So it is -- in total amount, Alex, it's not overwhelming, but I think it will definitely have a much bigger return on what our investments are to actually make the best out of the 2 networks. Let me then address your last question before Maarten talks about the metrics. This is why didn't we approach. Now in the industry, we've had conversations, of course, in the past. Yes, they were quoted lower before, but until very recently or until we actually saw the announcement, we, and we're probably not the only ones, felt there was a clear signal that they were not contemplating a strategic change. And to be honest, who keeps proposing to somebody who doesn't want to get married? So obviously when the announcement came out, the first announcement, it was for us -- since we knew the situation quite well, the markets and the lay of the land, that was for us to -- basically in high speeds to start working at resolving our potential deal certainty issues we might have had. So there is not much more to the story than that, to be honest.

Yes. Maybe on the metrics, I think it's a pretty simple answer. We have worked quite -- we've spent quite a bit of time to underpin this business case for us, but ultimately we look at the same metrics we look at internally for our business, which is basically the top line development. It's the return on sales; and of course, cash generation linked to working capital; and last but not least, return on investment. So it is very much the same metrics we look at internally which will apply also for the metrics we look at this case from an operational management perspective.

Alex, did that answer your question?

Yes.

And the next question comes from the line of Jaideep Pandya from On Field Research.

First question is around just the logic behind this deal. So essentially, if I am not wrong, what you're doing is buying Tikkurila's deco and selling your own deco in the Baltic and the Nordic region. And so basically I just want to understand. How deep is the M&A pipeline that you have to go for an asset which -- who has already a bid? Because essentially, if I back out your deco business from the deal, then we are looking at a deal for which you have to do a lot of work not to move the needle too much. That's the first question. And the second question really is, very simply, given that you're going to, if everything goes well, spend a decent chunk of money buying Tikkurila, when will you start buying shares of the lovely paint company AkzoNobel again?

All right, a couple -- Jaideep, thank you for your question. Now the logic, I just want to -- just there seems to be a misconception. The overlap is only a part of what we get in. So there is a significant -- it's not just we sell one and we buy one. We sell part that is overlapping with a part of the activities of Tikkurila. So I just want to be clear there that it's still a significant step-up that would -- or delta that actually comes to our bottom line. Now so you say, well, [ if the view were to climb ]. Well, frankly, we wouldn't. And I think you've got to know this, Jaideep, that we -- there's a number of deals that we let go by. I just want to remind people the Dulux one, for example, in New Zealand. [ We said, "No, thanks." ] It was actually several -- the same multiples as we talk about here, but we felt there is no credible story to create synergies in this whole thing or to create value. And just for the emotional reason of just having Dulux, the whole band together, that was not strong enough for us. So I just want to remind you all these are the same people who do the offer here. So the reason is that we feel that, sure, any M&A is work to get done, but that is -- actually is addressing it. It is actually an quite nice, value-accretive opportunity that we have. So on the M&A pipeline I think we feel pretty comfortable of what we have there. This is just one. I mean it's not often that assets like this come on the market where we have for a long time felt this is kind of an obvious one to create value and we should be the better owner of this. On the share buybacks, I think I'll let Maarten talk about share buyback versus something else, but I just want to remind people, before we do that, that we are continuing with the share buyback that we have. So I think it shows you probably also the cash generation that we have currently in the company. So we feel pretty comfortable around that. And then I think, Maarten, you can perhaps explain how it feels, it sits in our priorities.

Yes, yes. So overall I think this fits very much in our capital allocation priorities. We are continuing with the current share buyback of EUR 300 million, and in the meantime, we're announcing this potential deal. So it is basically firing on all cylinder in terms of capital allocation priorities, and that's what we said we will do and that's basically what we are doing at the moment.

So Jaideep, for us it was pretty clear. On any of the deals we did, are we better off spending the money buying our own shares, or are we better off doing the M&A? And that's where we landed on this one.

Just to follow up. God forbid, if the deal doesn't go through for Akzo and that lovely company from the other side of the Atlantic goes crazy on the offer, what is your plan B given that they will clearly then become #1 in the Baltics and the Nordics? So is there a plan B where you already have a strategy that, if there's a change in the owner, with obviously a change in culture and heritage angle, you will ratchet up your marketing to gain market share in the Baltics? I'm just trying to understand if there is -- if the other guys win it, it's still actually not so negative, Akzo.

Yes, well, first of all, Jaideep, I'm not sure if I would use the words God forbid. I think we're going to be very disciplined in what we offer. If it goes to a level where we feel we can't create value on that, then frankly, may the force be with whoever buys the company. So I think in that sense we'll be very disciplined. For what we are concerned, I think I've alluded to that. I think we're doing -- the momentum in those regions, the subregion here from EMEA, we are actually doing quite well. I mean the business is now very healthy. I think we're having good growth in those markets, so the plan B would be, all right, we just continue to build on that. We would probably more invest in that region as we were planning to do. So I think we're pretty comfortable around the growth momentum. It's going to be less of a quicker step-up because you have to do it then organically. And then we'll move on to other M&A targets. So in this sense it's a very rational decision, but this will just be an opportunity. We think it would accelerate things. Did that answer your questions, Jaideep?

Yes, yes, absolutely, yes.

And the next question comes from the line of Geoff Haire from UBS.

Most of mine have been asked, but I just have 2 remaining ones. First of all, have you talked to any of the major shareholders of Tikkurila about this offer you've made? And then secondly, I haven't had a chance to read through the offer document of PPG for Tikkurila. Is there a break fee that you will have to fund effectively if your deal goes ahead given that sort of Tikkurila board have already recommended this to their shareholder...

Yes. Geoff, on your first question, we have some joint shareholders between us and Tikkurila. Those topics, of course, have come up in the past, but I'm going -- I'm stressing the words "in the past." In this specific episode now, we have not talked to the shareholders, so the answer is a no. Secondly, before we go into break fees and what would happen, et cetera: I think the PPG offer has some details in it. We have spoken to the Tikkurila board. They are assessing it, so I would probably not want to comment on what other elements that they might bring up in an answer. So I think stay tuned, I would say.

And the next question comes from the line of Chetan Udeshi from JPMorgan.

Can I just clarify 2 things? First, one, in terms of divestments to Hempel, is it going to be essentially from SBU West of Tikkurila? I mean that -- those countries in SBU West. And I know you don't want to give a specific number, but should we assume at least less than half of the revenue of Tikkurila in that region will be essentially divested? And in terms of what you get from divesting some of these assets as part of the package, can we assume the multiple that you get would be similar to what is a multiple you might be paying for the rest of the business of -- or the whole business of Tikkurila?

Yes, okay, a couple of questions here, Chetan. And I'll have to disappoint you upfront that, some of them, we will not answer on that, but on the multiples given or obtained, I would say we refer to a win-win. And that's how I think both Hempel and us think about it. So I think that's suffice. That probably gives you an idea on -- or at least some feeling on where we came out on both sides. So I think we feel pretty comfortable that we haven't -- that we have a good deal on both sides, on that. On the size, I'd rather not go in there because that's slightly dependent on the different scenarios that come out, but yes, if this were to go on, there would be -- in that SBU West, there will be significant step-up in top line. So I'm not going to go more quantitative than that. And then last but not least, if you talk about to -- the steps we would have to take to make it happen. Most of the deal certainty questions revolved around not all but some countries or subregions in SBU West, so yes, the steps we were preparing for related to the SBU West. Did that answer your questions, Chetan? I know it's a disappointing answer, but so be it.

Yes.

And the next question comes from the line of Matthew Yates from Bank of America.

I think we've covered most of it. I did just want to come back to governments and the chain of events here. You're arguing it's a very logical deal and you are the right owner. Could you not have been more aggressive in the past in presenting such a combination to the Tikkurila board? I mean clearly you've now found yourself in the midst of a bidding war, offering over a 100% premium. And there's the risk here that you have to continue to go higher. And so is there anything you can say about access to information or additional due diligence that you would like to get from Tikkurila in order to help you fully form your offer?

Yes, Matthew, good questions. Again, I've addressed it before. I think -- in the previous context until relatively recent, I think we were led to believe that the company Tikkurila was not considering a strategic move. Since we have high respect for the assets of Tikkurila and before -- because we thought this is really a very good combination, we weren't necessarily going to push it, so we were somewhat surprised about what came out in view of that there was obviously a change of heart in the board of Tikkurila. I object against the word bidding war, however. I think for us what came out when we saw the first announcement of -- well, of the offer in December, for us it was just a signal, "So Tikkurila is in play." And then we just basically could crank up all the work we had done, including then accelerating how to get to deal certainty as part of the package. So I can only refer to, on the bidding, we've done our homework. We know what the value of the asset is for us in a very realistic and achievable value creation, and that's the only thing. So there is no bidding arm wrestling going on here. I mean this is what the asset is worth for us, and we believe the combination would be very powerful. I don't know if you want to address on the other question on where we -- that Matthew has.

Yes. So on the process going forward, of course, we will ask access to information equal to the access PPG has had in terms of due diligence and therefore make sure that we validate and confirm all the assumptions we have taken, so far. And that will lead maybe to further review or sharpen our pencils, but that will be the steps going forward.

I just want to point out though, Matthew, that in many of the markets we are alongside Tikkurila in the markets, so we know their market positions, their distribution channels, their logistic setup. We know it quite well. So I think the diligence would be limited to more central information. We have the advantage. That's also why we can create these efficiencies. We know in quite a level of detail how their positions are and how they operate in countries...

If I can just sneak in a quick -- yes. Sorry, just one quick follow-up, though, in terms of the change in tone or strategy, if you will, from Tikkurila. Do you think that is purely a financial consideration that somebody has been willing to put up a very high premium that creates more value for its shareholders than it could organically? Or is there anything in the broader industry and its structure that's suggesting that there is a sort of consolidation trend that maybe they thought their relative competitive position was going to come under threat?

I think, Matthew, the consolidation trend in the industry is pretty obvious. And I think, in 2020, for a large part of the year, it was a bit calm given the COVID restrictions, et cetera. So people probably tended to go to the assets they knew best for some of the deals that happened. So I think the consolidation is very clear. On what the inner motives are of the Tikkurila board, I frankly think you should ask it to the Tikkurila board. I'm not sure if that is for us to comment, so yes.

And the last question comes from the line of Martin Evans from HSBC.

Again just going back to Tikkurila's market position. Obviously, you see a lot of operational efficiencies and potential on cost savings. What would you be getting, sort of in addition to that, in terms of their exact market position? Because if we look back to the days of ownership by Kemira and then when the business was subsequently spun off, the messaging was very much that the business is #1 in the Nordics; and also at the time, I seem to recall, #1 in Russia too. Has the business maintained that, those very strong market positions, which are obviously massively important on a deco business where brand leadership and local loyalty is hugely important? So would you be essentially buying a #1 position immediately in the Nordics and also in Russia to which you could add your own operational cost savings and so on?

Yes, well, just to answer the question: It's pretty clear, yes. I mean Tikkurila has. In the markets they operate in, in the Nordics, Baltics and then Russia, et cetera, they have the leading position. That hasn't changed at all. I think, in the last 3 to 4 years, and we've commented that in previous sessions, I think, we've been pretty busy on getting our Nordics business really operationally healthy and also financially healthy. And that has been quite successful. We've actually crept up across that whole subregion, including Russia. I think we've been creeping up in market share, but yes, with this deal there are very strong market positions that come, and that makes it so attractive. And in certain areas, I mean, the reality will be that it's a bolt-on but reverse, I would say, where we can have our business being -- becoming part of what Tikkurila has built and therefore create the efficiencies and the stronger market impact that way. So -- but they kept definitely their position [ great ].

Great. So thank you very much. That's about all the time we have for today, so for additional information, please contact AkzoNobel investor relations. And we look forward to speaking to you again soon.

Thank you.

Thank you.

This concludes our conference call. Thank you all for attending. You may now disconnect your lines.