Dulux Owner Risks Clash with Pensioners on Payout

Dulux paint owner Akzo Nobel’s plan to appease shareholders with a €1.6bn cash sweetener is at risk from a powerful band of British pensioners from the former ICI and Courtaulds empires.

The Dutch chemicals giant promised a one-off €1bn special dividend and a 50% rise in its regular payout — a cash return totalling €1.6bn — to fend off a takeover by American suitor PPG. Its bigger rival last week walked away after Akzo rejected three bids pitched at up to €26.9bn (£22.8bn).

Akzo plans to shrink by a third, offloading its specialty chemicals business via a sale or stock market listing, to focus on paints and coatings. It will raise its regular payout to €2.50 per share and said the “vast majority” of the proceeds from the specialty sale would be returned to shareholders.

That could fall foul of pensioners in its two biggest retirement funds, the ICI and Akzo Nobel CPS schemes. They are believed to have a say in any sizeable disposals or deals by Akzo that risk weakening the “covenant” or strength of the company.

The two vast British final salary pension pots together have more than 76,000 members and account for €14bn of Akzo’s pensions debts. Fewer than 1,000 of these are still employees.

A throwback to the Dutch giant’s controversial £8bn takeover of the former Imperial Chemical Industries in 2008, the bigger ICI scheme had an estimated deficit of £661m last year. The CPS scheme’s shortfall was £126m.

ICI pension trustees intervened in Akzo’s takeover in 2007 to insist on being involved in the negotiations. Akzo is entering talks with the trustees this year over plugging its pensions deficit, with a deal due by next June.

Industry sources said Akzo’s exceptional dividend payout would also attract scrutiny from the Pensions Regulator, which recently warned it would go after firms that prioritise dividends at the expense of pensioners, following the BHS scandal.

The CPS scheme says on its website that it “takes very seriously its role in safeguarding the long-term security of members’ benefits”. The ICI scheme declined to comment.

Akzo has told investors it will “manage our pension liability as we have done in the recent years, and we will ensure we fulfil our obligation”.