AMSTERDAM (Reuters) - U.S. paint maker PPG Industries PPG.N raised its proposed offer for Akzo Nobel AKZO.AS by about 8 percent to 26.9 billion euros ($28.8 billion) on Monday, increasing the pressure on its Dutch rival to enter into talks.

FILE PHOTO: A view of AkzoNobel's headquarters in Amsterdam, February 6, 2014. REUTERS/Toussaint Kluiters/United Photos/File Photo

PPG said its proposal was a “final” invitation to Akzo to enter negotiations and included a break fee in case the deal was rejected by regulators - attempting to address a concern that Akzo raised when it rejected two previous proposals from PPG.

The move turns up the heat on Akzo ahead of its annual meeting on Tuesday where it will face a group of shareholders unhappy it has not engaged with PPG. Shares in Akzo, the maker of Dulux paint, jumped as much as 6 percent to a record high of 82.95 euros following the improved proposal.

The shareholders, led by hedge fund Elliott Advisors, say Akzo should at least open exploratory talks with Pittsburg-based PPG.

“I think it’s important for them to do the due diligence and to sit down and listen to us,” PPG Chief Executive Michael McGarry said in an interview. “They have run out of excuses to throw on the table to say why they shouldn’t.”

He said PPG believed the deal would add to its earnings from the first year and given the support from Akzo shareholders, the U.S. firm would submit a formal offer to the Dutch financial markets regulator by June 1, regardless of what Akzo does.

Akzo confirmed it had received a “third unsolicited proposal” from PPG but was non-committal in its response.

“The Board of Management and Supervisory Board of Akzo Nobel will carefully review and consider this proposal,” said Akzo, noting it was required by law to study the bid.

Analysts from Morgan Stanley said it was noteworthy Akzo had not rejected the bid out of hand, and that PPG had made significant concessions - not only on the break fee but also on employment, pension plans, research and development spending and the location of production facilities.

“This is the first time Akzo has said it will review an offer from PPG, although we will have to wait and see what decision is ultimately made”, the analysts said in a note.

“NO ROOM FOR EXCUSES”

Elliott, which holds a 3.25 percent stake in Akzo, said the PPG offer was worth more than the value Akzo could achieve as an independent company.

The activist investor urged Akzo’s boards to enter talks with PPG, saying a hostile bid might not include the same guarantees for stakeholders such as shareholders and employees.

“Elliott therefore believes that friendly discussions now are in the best interest of all,” it said in a statement.

Columbia Threadneedle Investments, a top-20 investor in Akzo with a 0.77 percent stake, said in a statement Akzo’s boards had “no room for excuses now and must enter into proper discussions with PPG”.

PPG said its new proposal was worth 96.75 euros per Akzo share, comprised of 61.50 euros in cash, 0.357 shares of PPG common stock and dividends worth 7.78 euros.

That’s a 50 percent premium to Akzo’s closing price of 64.42 on March 8, the day before PPG confirmed it had made a proposal to buy Akzo at 80 euros per share.

A second proposal worth 90 euros per share on March 20 was rejected within 48 hours, with Akzo arguing it substantially undervalued the company and would be bad for other stakeholders, such as employees and customers.

“I do not see how Akzo’s board can now not engage,” said Michael Wegener, managing partner at hedge fund Case Equity Partners, which has invested 6.7 percent of its assets in Akzo.

“If they don’t, PPG is very likely to take this directly to shareholders.”

Last week, Akzo presented its case for remaining independent, offering shareholders 1.6 billion euros in extra dividends and detailing plans to sell or float its chemicals subsidiary, which represents a third of company sales and profits, within one year.

Both moves, if completed, would make Akzo a less attractive target for PPG, although the U.S. company has said the primary reason for the takeover would be synergies of $750 million between the companies’ paints and coatings businesses.