Perspectives on Akzo’s Employees

5 May 2017

CONFIDENTIAL 1
General Disclaimer

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CONFIDENTIAL 2
Disclaimer regarding ChemQuest

Some of the information in this presentation is sourced from ChemQuest

 The ChemQuest Group, Inc. ('ChemQuest') is a global 'specialist' consulting firm specializing in the chemicals industry, and
was retained by EAUK to conduct an analysis of Akzo Nobel NV in the period from January 2017 to May 2017. EAUK asked
ChemQuest to look at Akzo Nobel’s business attractiveness and competitive position, potential value improvements, portfolio
coherence & synergies as well as other long-term value creation opportunities.
 ChemQuest conducted this project independently and the views contained herein reflect its own research, analysis and
opinions. EAUK makes no representation, warranty or guarantee, express or implied, concerning this document and its
contents, including whether the information (which may include information and statistics obtained from third party sources) is
accurate, complete or current.
 This report is based on analyses conducted within the coatings and specialty chemicals markets and is delivered on a best-
efforts basis and conclusions have been derived from publicly available information and ChemQuest’s knowledge base.
 Certain of the information herein is proprietary to ChemQuest and cannot be reproduced without their prior written permission.

CONFIDENTIAL 3
Executive Summary

An Akzo-PPG combination is likely to generate better prospects for Akzo’s employees

 An Akzo-PPG combination is likely to create a stronger company with better growth and employment prospects
o Akzo-PPG has the potential to be an industry leader with a strong brand portfolio, excellent customer and supplier
relationships, R&D and technology leadership, and a competitive cost position
o PPG estimates a combination with Akzo could yield $750MM of potential synergies
o PPG can create value in ways that do not necessarily affect employment (e.g., raw material purchasing synergies, cross-
selling opportunities, etc.)
o ChemQuest and Elliott believe fewer than 1,500 Akzo jobs would be at stake in a combined Akzo-PPG
o In addition, the combined company is more likely to create new jobs due to its strong growth prospects

 Akzo’s standalone plans carry greater employment risk

o To achieve the 3.4 percentage point margin improvement guidance(1) set out on 19 April, Akzo would likely need to
continue to aggressively restructure
─ A simple extrapolation of CEO Ton Büchner’s first two full years at Akzo suggests up to 11,000 Akzo employees may
be at risk (Elliott and ChemQuest believe this to be an unlikely scenario)
─ A more detailed “bottom-up” analysis by ChemQuest suggests 6,404 employees may be at risk

 The only way to properly address and consider the well-being of Akzo's workforce is for all parties to engage. Akzo's Boards
have a responsibility to seriously consider all alternatives and their potential impact on employees and other
stakeholders

NOTE (1): on 19 April 2017, Akzo stated a 14% margin target by 2020; this represents a 3.4 percentage point improvement from 2016’s 10.6% margin.

CONFIDENTIAL 4
Akzo Standalone Employment Analysis (1/2)

Extrapolation of recent history suggests almost 11,000(1) Akzo employees at risk (unlikely
scenario)
…while 3,740 employees lost their jobs
From 2012 to 2014, Akzo’s margin improved by 1.18 percentage points…
due to the ‘ongoing restructuring’

 Akzo’s 2013 AR, page 126:

Return on Sales (Margin)
8.0%

1.18 percentage
point increase 7.5%
7.5%

7.0%  Akzo’s 2014 AR, page 151:

6.5%
6.3%

6.0%
2012A 2014A

NOTE (1): the above figures imply approximately 3,200 job losses per 1 percentage point of margin improvement during this period. Crudely extrapolating
this ratio to the 3.4 percentage point improvement target yields almost 11,000 job losses. This analysis should be viewed as an unlikely worst case scenario.
SOURCE: Akzo’s Annual Reports.

CONFIDENTIAL 5
Akzo Standalone Employment Analysis (2/2)

ChemQuest estimates more than 6,404 Akzo employees at risk

 To estimate employment risk, ChemQuest first analyzed Akzo’s top-line growth history and prospects:
o From 2012 to 2015, on an organic basis (i.e. adjusted for acquisitions and divestments), Akzo lost significant market
share in several of its large businesses
o Akzo’s significant ‘restructuring’ has negatively impacted the organizational culture; as a result, Akzo’s capacity for
generating sustainable organic growth has been depleted
o Hence, ChemQuest does not expect Akzo to grow faster than the market; in fact, a growth rate between 0.0% and 2.5%
per year appears to be the most likely outcome on a standalone basis

 ChemQuest translated Akzo’s updated margin guidance and expected top-line growth into job loss estimates:
o Assuming an organic revenue growth rate of 0.0%, Akzo would need to decrease employment by a net amount of
6,404 (the gross reduction would likely be even higher)
o Assuming a more optimistic organic revenue growth rate of 2.5%, Akzo would need to decrease employment by a net
amount of 2,314 (the gross reduction would likely be even higher)

 A note on Specialty Chemicals employees:

o The above analysis assumes that all divisions remain as part of a standalone Akzo
o If Akzo’s Specialty Chemicals business were to be acquired by a strategic (which would likely have synergies) or by a
private equity buyer (which would likely push for radical cost cutting) the number of job losses could exceed the range
estimated above
o If Akzo were to be purchased by PPG, there would not be any synergies for the Specialty Chemicals unit, because PPG
does not own a specialty chemicals business; in fact, the combined company would likely focus its attention on integrating
PPG’s and Akzo’s paints and coatings units

SOURCES: Akzo’s Annual Reports; ChemQuest analysis.

CONFIDENTIAL 6
PPG’s employment is growing while Akzo’s is shrinking

From 2009-2014, Akzo fired 11,970 employees due to ‘ongoing restructuring’

…which has driven down Akzo’s overall employee number

Akzo has experienced massive ‘ongoing restructuring’…
while PPG’s employee number has grown significantly

Cumulative Akzo Employees Average Number of

Fired Due to ‘Ongoing Restructuring’ Employees During Year
14,000 60,000
11,970 Impact of Akzo
12,000 ‘ongoing
55,000
restructuring’ PPG
9,970 on
10,000 employment
8,230 not provided 50,000
in Akzo’s
8,000 2015 and
6,780
2016 Annual 45,000
5,730 Reports
6,000
3,960 40,000 Includes organic
4,000 employee growth
(i.e. net hiring) as
2,000 35,000 well as growth due
to M&A
– 30,000
2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016

NOTE: Akzo did not explicitly break out the impact of ‘ongoing restructuring’ in its 2015 and 2016 Annual Reports; overall employee figures for Akzo and
PPG have been impacted by acquisitions, divestments, firing, and hiring.
SOURCES: Akzo’s Annual Reports; PPG’s Annual Reports.

CONFIDENTIAL 7
PPG combination likely to impact fewer Akzo employees than Akzo standalone

ChemQuest estimates 1,432 Akzo employees may be impacted in a PPG combination

Impact of Akzo-PPG Combination on Akzo Employment

Synergies in PPG's 24 April Letter (USD MM) $750
FX Rate (USD / EUR) 1.09
Synergies in PPG's 24 April Letter (EUR MM) €687
Akzo Synergies
Employees Related to
Synergy Synergy Employee Share of Akzo Akzo
Breakdown Breakdown Employee Related Synergies Employees Employees
Assuming a similar synergy breakdown to Sherwin-Valspar… (%) (EUR MM) Related (%) (EUR MM) (%) (EUR MM) Affected
Akzo-PPG SG&A Synergies 45% 309 80% 247 60% 148 1,141
Akzo-PPG Raw Materials Synergies 45% 309 0% –
Akzo-PPG Manufacturing & Distribution Synergies 10% 69 50% 34 55% 19 291
Akzo-PPG R&D Synergies 0% –
Total 100% 687 41% 282 59% 167 1,432

NOTE: to be conservative, the above analysis does not include revenue synergies, which could be significant (e.g., cross-selling) and would decrease the
amount of employees expected to be affected by the combination.
SOURCES: PPG’s 24 April 2017 letter to Akzo; Sherwin-Valspar precedent; ChemQuest analysis.

CONFIDENTIAL 8
Conclusion: a standalone Akzo creates less value and greater employment risk
On 19 April, Akzo claimed it is best placed to unlock value in the company
However, Akzo standalone has limited value
creation options, which entail significant risks
 On a standalone basis, Akzo has limited space
to maneuver to create value:
o Increasing prices (potential consequences:
volume loss; damage to customer relationships)
o Decreasing supply costs (e.g., by decreasing
supply quality) (potential consequences:
reputational risks; environmental risks; damage
to customer relationships)
o Decreasing employment (potential
consequences: damage to culture and
motivation; decreases capacity for growth)
 As a result, to create similar value on a standalone
basis as in a PPG combination, Akzo may take
actions that put its business reputation and
employees at risk
 Akzo faces restructuring fatigue
CONFIDENTIAL
A PPG combination could create greater
value with lower employment risk
 In a combination with PPG, Akzo can create
significant value for all stakeholders by:
o Focusing combined R&D skills on incremental
opportunities (creating better products for
customers using similar R&D spend as two
separate entities)
o Improving raw materials sourcing via economies
of scale
o Cross-selling products
o Improving distribution logistics
 All of the above value creation ‘levers’ have the
potential to create value without reducing
employment
 PPG is a serial acquirer with a proven track record of
value creation for all its stakeholders
9
 APPENDIX

CONFIDENTIAL 10
Summary of jobs at risk under various scenarios

An Akzo-PPG combination is likely to generate better prospects for Akzo employees

Jobs at Risk
12,000
10,815

10,000

8,000

6,404
6,000

4,000

2,314
2,000 1,432

–
Akzo Standalone:
Crude Extrapolation of 2013-
2014 Restructuring (3,740
Redundancies)
Akzo Standalone: Akzo Standalone: Akzo-PPG Combination
Nuanced Bottom-Up Nuanced Bottom-Up (NOTE: Does Not Include
ChemQuest Analysis ChemQuest Analysis Impact of Expected Job
(Low Organic Revenue (Optimistic Organic Revenue Creation)
Growth Case) Growth Case)

SOURCE: Akzo’s Annual Reports; ChemQuest analysis.

CONFIDENTIAL 11
On 19 April, Akzo guided to improving its Return on Sales (i.e. margin) from
10.6% in 2016 to 14% by 2020

This ambitious target represents a 3.4 percentage point margin improvement

SOURCE: Akzo’s Investor Update on 19 April 2017.

CONFIDENTIAL 12
Global Paints & Coatings Market Size and Akzo & PPG Market Shares

The overall market has grown significantly since 2012; since then, Akzo has lost market
share while PPG has gained market share

Evolution of Global Paints & Coatings Volume (left axis) and

of Akzo & PPG Market Shares (right axis), 2012 vs. 2015
50,000 15%

40,000 12%
Volume (liters, millions)

Market Share
30,000 9%

20,000 6%

10,000 3%

0 0%
2012 2015
AN Market Share PPG Market Share

SOURCES: ChemQuest; IPPIC estimates.

CONFIDENTIAL 13
Historically, Akzo has grown slower than the market

From 2012 to 2015, Akzo lost market share on an organic basis

Akzo Decorative Coatings lost market share Akzo Performance Coatings lost market share

Akzo Decorative Coatings Volumes Akzo Performance Coatings Volumes

Underperforming
the market
Underperforming
the market

10% 7.5% 13% 12%

market market market market
share share share share

NOTE (1): market growth refers to the growth Akzo would have achieved if it had grown in line with the market.
NOTE (2): market share change is based on 2012 market size.
SOURCES: ChemQuest; IPPIC estimates.

CONFIDENTIAL 14
Historically, PPG has grown faster than the market

From 2012 to 2015, PPG gained market share on an organic basis

PPG Decorative Coatings gained market share PPG Performance Coatings gained market share

PPG Decorative Coatings Volumes PPG Performance Coatings Volumes

Outperforming
the market

Outperforming
the market

5% 9% 8% 10%
market market market market
share share share share

NOTE (1): market growth refers to the growth PPG would have achieved if it had grown in line with the market.
NOTE (2): market share change is based on 2012 market size.
SOURCES: ChemQuest; IPPIC estimates.

CONFIDENTIAL 15