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Axalta Ends Talks with Akzo Nobel, Starts Merger with Nippon

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Axalta’s merger plans

On November 21, 2017, Axalta (AXTA) announced that it backed out of the possible merger with Akzo Nobel. The companies couldn’t agree on the merger terms. The merger talks between Akzo Nobel and Axalta came to light on October 30, 2017. Axalta thought that the merger with Akzo wasn’t in shareholders’ interest to create long-term value.

Charles W. Shaver, Axalta’s chairman and CEO, said, “After pursuing a potential combination of Axalta and Akzo, we concluded we could not negotiate a transaction on terms that meet our criteria. 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.”

After exiting the talks with Akzo Nobel, Axalta confirmed that it’s engaged in talks with Nippon Paint about a potential acquisition. Whether or not the deal goes through depends on whether it will serve shareholders’ interest.

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Update on Axalta stock

Axalta stock fell 3.70% and closed at $32.08 for the week ending November 24, 2017. As a result, the stock is trading 18.50% above the 100-day moving average price of $30.55. On a year-to-date basis, the stock has risen 33.10%, while its peers Sherwin-Williams (SHW) and PPG Industries (PPG) have risen 46.60% and 22.50%. In contrast, RPM International’s (RPM) stock prices have fallen 2.80%.

Investors need to be cautious because Axalta’s 14-day relative strength index has touched 79, which indicates that the stock has temporarily moved into overbought territory and could face some selling pressure.

Investors looking for indirect exposure to Axalta can invest in the iShares U.S. Basic Materials ETF (IYM), which invests 1.20% of its holdings in Axalta as of November 24, 2017.

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