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Key Updates from the Chemical Sector Last Week

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Key Updates from the Chemical Sector Last Week PART 1 OF 3

Axalta and AkzoNobel Confirm Potential Merger Discussions

Axalta and AkzoNobel in discussion

On October 30, 2017, Axalta (AXTA) and AkzoNobel confirmed that they are engaged in talks about a possible merger involving Axalta and Akzo’s paints and coatings business. AXTA said that it would consider the merger option only if the board of directors thinks it’s in the best interest of its shareholders. As the talks are in the initial stage, there is no guarantee that the companies will reach a definitive agreement.

Axalta and AkzoNobel Confirm Potential Merger Discussions

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A few months earlier, Akzo rejected the merger proposal from PPG Industries (PPG). Wall Street estimates the merger deal to be at ~$30 billion.

Axalta’s stock performance last week

AXTA’s stock fell 0.90% to close at $32.84 for the week ended November 3, 2017. However, when the merger news came out, the stock rose 17.0% on October 27. The gain in stock price has resulted in the trend reversal of the 100-day moving average price. Now, the stock trades 7.7% above the 100-day moving average price of $30.45. On a year-to-date basis, the stock has risen 11.6%. Peers RPM International (RPM) and Sherwin-Williams (SHW) have returned 2.0% and 29.6%, respectively. However, analysts have projected AXTA’s one-year target price to be at $33.06, another 0.70% gain from its current price. With an RSI of 67, AXTA is neither oversold nor overbought.

Investors looking for exposure to AXTA indirectly can invest in the iShares U.S. Basic Materials ETF (IYM), which invests 0.90% of its holdings in Axalta as of November 3, 2017.

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