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AMSTERDAM (Reuters) – Dutch paints maker Akzo Nobel, under pressure after rejecting a lucrative takeover offer and two profit warnings, has confirmed merger talks with smaller U.S. rival Axalta Coating Systems Ltd to create a $30 billion company.

Akzo, the maker of Dulux paint, announced it was in “constructive talks” about a “merger of equals” in what would be the first major deal by Chief Executive Thierry Vanlancker, who took over in July after Akzo spurned a 26 billion euro ($30.2 billion) takeover offer from U.S. rival PPG Industries.

Reuters reported on Friday that Akzo had approached Axalta about a possible merger, sending Axalta’s shares 17 percent higher.

Akzo underlined in a brief statement that the talks will not affect its decision to sell its Chemicals Divisions, valued at 8-10 billion euros. It reiterated promises to return the “vast majority” of proceeds to shareholders.

Akzo has a market capitalization of 19.5 billion euros ($22.7 billion), while Axalta is worth $8.1 billion at Friday’s closing price of $33.15.

Akzo said merging with Axalta, whose truck coatings business fills a hole in its portfolio, would “create a leading global paints and coatings company.”

Vanlancker has been forced to cut targets made in the heat of the takeover battle twice in the space of six weeks, blaming disruption caused by hurricane Harvey, rising raw materials costs and “headwinds” at its marine coatings business.

Akzo also faced lawsuits earlier this year from shareholders angry over its decision to reject PPG.

Akzo shares were 0.7 percent lower at 76.93 euros at 0900 GMT, well below a figure of around 96 euros proposed by PPG.

PRESSURE TO DELIVER

Analysts from Bernstein said in a note the deal is a “sensible” idea, combining the number 3 and 4 players. The new company would trail the Sherwin-Williams/Valspar combination and PPG globally.

An Akzo-Axalta merger “would improve scale and density in segments and countries where needed while taking out costs, most likely in the fragmented general industrial segment and in Europe,” they said.

They forecast savings of around 250 million euros from combining operations.

Analyst Joost van Beek of Theodoor Gilissen said the timing of the Axalta deal will be difficult, and Akzo’s management is under pressure to pull it off.

“There is a large risk that Akzo will pay too much, as it is clear that they want to stay out of the hands of PPG, and Axalta knows that.”

Akzo did not disclose how it is considering structuring the deal, though promises to return proceeds from the chemicals division sale to shareholder and describing the deal as a merger suggests Akzo may pay mostly with shares. A spokesman declined comment beyond the statement confirming talks.

Sources familiar with the matter told Reuters on Friday that talks were at an early stage and there was no guarantee the companies would come to an agreement.

Akzo said it would sell the Specialty Chemicals division, which represents a third of its sales and profits, as it attempted to avoid a takeover by PPG.

Akzo has also committed to return at least 1 billion euros extra to investors this year via a special dividend, in advance of the division sale.

After the PPG deal fell through, a group of shareholders launched a court case seeking a vote to have Chairman Antony Burgmans removed, but lost.

Akzo’s CEO and CFO then resigned, citing health reasons, while Burgmans is due to retire next year.

PPG, which faced opposition from Dutch nationalist politicians, business leaders, labor unions, and the company’s boards, has indicated is no longer interested in trying to buy Akzo.

After walking away from the deal on June 1, PPG is barred from rebidding for Akzo until Dec. 1.

Private equity firm Carlyle Group LP , Axalta’s former owner, had considered selling the company to Akzo in 2014 before taking it public.