ICI Rejects the Bid From Akzo

Akzo fell 1.8 per cent to €60.48, as Rabo Securities analysts said a bid of 600 pence a share or above would be value-destroying for its shareholders.

Analysts said, buying ICI, which makes 27 percent of its sales in Asia, would give Akzo a bigger share of fast-growing emerging markets and help it fix its underperforming European decorative business, with minimal antitrust issues.

"Akzo Nobel will continue to evaluate all strategic opportunities, including ICI, based on a disciplined and value-driven approach to earnings and returns over cost of capital," Akzo representative said.

Apart from ICI, Valspar and Sherwin-Williams are among Akzo's likely takeover targets, analysts have said. ICI could also attract other suitors.
ICI representative said its directors had unanimously rejected the Akzo proposal. "The Board is very confident in the group's strategy and strong growth prospects".
"With the cycle nearing the peak, we believe that other chemical companies will look at ICI as a way of broadening product geographic exposure," JPMorgan Cazenove said.

"With no shortage of likely interest, and a robust ICI response, the pressure on the share price will likely be upwards."

U.S. groups Dow Chemical and DuPont, Germany's BASF and India's Reliance group have also been regarded as possible bidders for ICI.

Many analysts said the purchase price could rise to as high as 750 pence, or 13 times EBITDA (earnings before interest, tax, depreciation and amortization), given the scarcity value of ICI's assets and the possibility of a bidding war.

Akzo accounts only for around 9 percent of the coating world market, as the industry as a whole is a very fragmented.

Akzo representative said it would continue its 1.6 billion-euro share buyback program launched on May 3 and would evaluate tax-efficient options of returning cash to shareholders.

HISTORY
Imperial Chemical Industries PLC was formed in 1926 from the merger of four British chemical companies to challenge the rest of the world's chemical producers.

The four were alkali company Brunner, Mond; Nobel Industries, a major explosives concern established in 1870 by Alfred Nobel, inventor of dynamite; United Alkali; and British Dyestuffs. The agreement to create ICI was made during a transatlantic voyage aboard the Aquitania and the company was formally incorporated on 7 December 1926, with 33,000 employees.

The principal products of the new company included chemicals, explosives and accessories, fertilisers, insecticides, dyestuffs, non-ferrous metals and paints. In its first year of business, 1927, ICI sold £27 million worth of products and made a pre-tax profit of £4.5 million.

The company's labour relations policies, with recognised works councils, an employee shareholding scheme and profit sharing, were advanced for their time. ICI's roundel, familiar today, was based on that of Nobel Industries.

In 1928 ICI moved into its newly built head office at 9 Millbank, London, not far from the Houses of Parliament and on the site of an ancient trade route which carried pre-Roman traffic to and from Europe across the River Thames at its lowest fordable point.

Today ICI is a major paints, adhesives and specialty products business with products and ingredients developed for a wide range of markets. - Alla Harutyunyan for HULIQ .COM