Dutch paint maker Akzo Nobel and U.S. peer Axalta said they had ended exploratory talks on a potential merger after they failed to reach agreement on terms.

The breakdown in talks follows a tempestuous year for Akzo in which it rejected a 26 billion euro ($30.5 billion) takeover offer from PPG Industries of the United States, angering its own shareholders, in favour of an independence plan featuring the disposal of Akzo's chemicals activities.

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".

In a separate statement, Axalta said it would now consider unspecified "alternatives".

Sources told Reuters that Axalta had broken off negotiations after receiving a superior cash offer from a different company.

"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's shareholders are to meet on Nov. 30 to approve the demerger of its Specialty Chemicals arms.

The news potentially opens the door to a return of PPG to rebid for Akzo Nobel, though 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.

Dutch labour unions and politicians openly opposed the deal and are currently drafting legislation to make foreign buyouts of Dutch firms more difficult.

Still, under Dutch market rules, PPG is only formally barred from launching another bid for Akzo until Dec. 1.

Since PPG walked away in June, former 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'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. ($1 = 0.8519 euros) (Additional reporting by Greg Roumelitis in New York; Editing by Gareth Jones)

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