By Greg Roumeliotis and Toby Sterling
NEW YORK/AMSTERDAM (Reuters) - Nippon Paint Holdings Co Ltd made an all cash offer on Tuesday to acquire U.S. coatings company Axalta Coating Systems Ltd, two people familiar with the matter said, a move which prompted the latter to end merger talks with peer Akzo Nobel.
Axalta and Akzo announced earlier on Tuesday they had ended negotiations about a "merger of equals" because they were unable to reach mutually agreeable terms.
Axalta, whose largest shareholder is Warren Buffett's Berkshire Hathaway Inc, said it continued to pursue other "value-creating alternatives", but it did not disclose Nippon's role in the termination of the discussions with Akzo Nobel.
Nippon, Japan's biggest paint supplier, made the all-cash offer for Axalta at a premium to where Axalta shares ended on Monday at $33.54, one of the sources said. The offer was credible enough for Axalta to end negotiations with Akzo Nobel, the source added.
It is not clear how far the negotiations with Nippon will progress though, and Axalta could also choose to engage in deal talks with other interested parties, the second source said.
Axalta has a market capitalization of $8.2 billion while Nippon has a market capitalization of 1.2 trillion yen ($10.7 billion).
Axalta shares reversed losses in extended trading hours in New York after Reuters reported on Nippon's offer, to trade up 3.3 percent at $35.01.
For Akzo Nobel, the breakdown in the talks with Axalta mark the end of a difficult year in which it rejected a 26 billion euro ($30.5 billion) takeover offer from PPG Industries Inc, in favor of a standalone plan.
Based on Dutch takeover rules, PPG could return with a new offer for Akzo Nobel as early as next month, if it so wishes.
However, PPG CEO Michael McGarry has indicated his company is no longer interested in Akzo after its three offers to the company in March and April were spurned.
Akzo said in a statement it would now continue to pursue that strategy of selling or seeking a stock market listing for its specialty chemicals division, which makes up a third of group sales and profits and has an estimated value of 8-10 billion euros.
Akzo promised to return the "vast majority of proceeds to shareholders".
"We concluded we could not negotiate a transaction on terms that meet our criteria," said Charles W. Shaver, Axalta's Chief Executive Officer. "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."
The failure of the talks comes days before Akzo Nobel's shareholders are to meet on Nov. 30 to approve the demerger of its specialty chemicals arms.
Since PPG walked away in June, former Akzo Nobel CEO Ton Buechner and former CFO Maëlys Castella have both resigned, citing health reasons, while Chairman Antony Burgmans is due to retire in April.
Akzo Nobel's new CEO Thierry Vanlancker said in a statement on Tuesday the company's strategy -- developed under Buechner and Burgmans -- offers "significant value for shareholders and other stakeholders in the short, medium and long term".
"We remain focused on our strategic options to continue to develop our business and improve profitability in the future," he said.
(Reporting by Greg Roumeliotis in New York and Toby Sterling in Amsterdam; Editing by Gareth Jones and Clive McKeef)
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