(Adds Nippon Paint confirmation, share reaction)
By Greg Roumeliotis
Nov 30 (Reuters) - Axalta Coating Systems has ended talks with Japan's Nippon Paint Holdings Co Ltd about a potential sale, the U.S. coating company said on Thursday, following the rejection of what sources said was a $9.1 billion all-cash bid.
The development makes Nippon Paint the latest unsuccessful suitor for Axalta, whose largest shareholder is Warren Buffett’s Berkshire Hathaway Inc. Axalta previously ended talks with Dutch paint maker Akzo Nobel NV about a merger earlier this month.
"While neither deal came to fruition, the keen interest by these companies underscores Axalta's global leadership position. We are well positioned to continue as a standalone growth company and will remain disciplined in generating superior long-term value for our shareholders," Axalta CEO Charles Shaver said in a statement.
Nippon Paint, Japan's biggest paint supplier and 39 percent owned by Singapore-based investment company Wuthelam Holdings Ltd, has been looking to expand into the U.S. market and boost earnings from automotive coatings.
Axalta said Nippon Paint's board was "unwilling" to meet Axalta's expectations regarding the value of the company.
Nippon Paint's latest cash offer valued Axalta at $37 per share, but Axalta wanted more, according to two people familiar with the matter who requested anonymity to discuss confidential details.
Nippon Paint confirmed the two companies had ended talks, adding that it would continue to look for M&A opportunities. The company's shares surged more than 10 percent in early trading in Tokyo.
Axalta shares were trading in New York at $37.25 before they were halted on Thursday afternoon ahead of Axalta's announcement, indicating that investors were expecting a deal at a higher price. The shares dropped 17 percent on news of the terminated deal talks to $31.19.
"While some M&A premium may linger in the stock, for the most part we expect (Axalta) investors to shift their focus back to end-market trends becoming healthier, pricing catching up to raw materials, and small-bore consolidation opportunities," Jefferies LLC analysts wrote in a note.
A deal with either Nippon or Akzo Nobel was seen as attractive by Axalta, because neither suitor appeared to present significant antitrust risk with regulators. However, agreeing on financial terms proved challenging.
Axalta's talks with Akzo Nobel ended over disagreements about how much premium Axalta shareholders deserved in what was branded as a merger of equals. Akzo Nobel wanted its shareholders to own 63 percent of the combined company, which Axalta considered excessive, according to the sources.
Akzo Nobel also wanted to keep much of its current governance arrangements, including keeping the top job with Akzo Nobel CEO Thierry Vanlancker and maintaining the combined company Dutch with headquarters in Amsterdam, the sources said. It had offered Shaver the chairman role, the sources added.
The negotiations between Akzo Nobel and Axalta came to a head early last week, when Vanlancker and his top lieutenants flew to New York to meet with Shaver, according to the sources.
"We had a very strong click with Axalta, but we were only ever interested in a merger. We were never prepared to pay a premium for a takeover, partly because of the outlook for the automotive industry," Vanlancker told an Akzo Nobel shareholder meeting on Thursday.
Akzo Nobel gained shareholder approval on Thursday to spin off its 10 billion euro ($11.9 billion) chemicals division as part of plans to placate investors after deal talks with Axalta ended and it rebuffed a takeover bid earlier this year from U.S. rival PPG Industries Inc.
A compulsory six-month cooling off period for PPG expires on Friday, which means it could return with another bid. PPG CEO Michael McGarry has said that the company has "moved on" from Akzo and is now seeking other growth opportunities. (Reporting by Greg Roumeliotis in New York,; Additional reporting by Bart Meijer in Amsterdam and Sam Nussey in Tokyo; Editing by Andrew Hay and Cynthia Osterman)