Monday August 13, 07:08 PM
Dutch chemical group bids 8.0 billion pounds for Britain's ICI
By Ben Perry
LONDON (AFP) - Chemicals and paints group ICI (LSE: ICI.L - news) on Monday became the latest British firm to fall into foreign hands after agreeing to be bought by Dutch rival Akzo Nobel (Amsterdam: AKZA.AS - news) for 8.0 billion pounds (11.8 billion euros, 16.1 billion dollars).
The board of Imperial Chemical Industries has agreed to the cash takeover, which requires approval from shareholders, after rejecting two previous approaches by Akzo earlier in the summer.
"We will create a leading global coatings and specialty chemicals company with a diversified geographic presence and well developed access to fast-growing markets in Asia-Pacific (002790.KS - news) , particularly China and Latin America," said Akzo Nobel chief executive Hans Wijers.
Analysts said the tie-up between Akzo, the maker of Crown Paints, and Dulux manufacturer ICI made sense amid expected further consolidation in the paints market.
Wijers indicated during a press conference in Amsterdam that "there may likely be job cuts" during the integration of the two groups.
Long-established British companies, such as ICI, are being snapped up or face being poached by cash-rich foreign groups seeking to grow outside their home markets.
Qatari investment group Delta Two last month announced a takeover approach for Britain's third-biggest supermarket group J Sainsbury, while earlier this year Corus was bought by Tata Steel of India.
In a joint statement released Monday, Akzo Nobel said the board of ICI had accepted a cash offer of 670 pence for each ICI share.
An analyst at the Netherlands-based investment group Theodoor Gilissen, Tom Muller, noted that the price of the takeover offer "is somewhat on the high side."
But he added: "In strategic terms, the decorative paints market is a mature one, while Akzo Nobel through ICI can strengthen its position in the US. And in mature markets one needs to increase volume in order to be cost-effective."
Akzo said Henkel (Xetra: 604840 - news) , a German maker of household chemicals and cosmetics, had agreed buy the adhesives and electronic materials businesses of National Starch and Chemical Co., which is owned by ICI, for 2.7 billion pounds.
"The pre-agreed on-sale of ICI's Adhesives and Electronic Materials businesses to Henkel is entirely consistent with our promise of financial discipline and provides the added benefit of being able to return additional cash to our shareholders in the near future," Wijers said.
The boss of ICI also threw his weight behind Akzo's improved bid.
"Akzo Nobel has today made a compelling offer which delivers full value for ICI reflecting ICI's strong future growth prospects and strategic opportunities," said ICI chief executive John McAdam.
"Accordingly, the ICI board will be recommending shareholders accept the 670 pence cash offer from Akzo Nobel as it believes it to be in their best interests."
Akzo said that it estimates annual pretax operating cost savings from ICI's paints business of 280 million euros, and expects to achieve synergies from increased sales across the combined portfolio.
The recommended offer is the culmination of two months of negotiations which saw ICI rebuff two informal offers from Akzo at 600 pence and 650 pence, before finally opening its books to the company last Monday following the 670 pence offer.
In Monday trade, the share price of ICI leapt 2.80 percent to close at 642 pence on London's FTSE 100 (news) index of leading shares. The FTSE surged 2.99 percent to end at 6,219.00 points.
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