Monday June 18, 12:48 PM
ICI brushes off Akzo Nobel bid worth 14 billion dollars
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LONDON (AFP) - British chemicals and paints group Imperial Chemical Industries (LSE: ICI.L - news) said on Monday that it had rejected a takeover bid worth 7.2 billion pounds (10.7 billion euros, 14.3 billion dollars) from its larger Dutch rival Akzo Nobel (Amsterdam: AKZA.AS - news) .
Analysts said Akzo may return with a higher offer amid inevitable consolidation of the paints market.
ICI shares rocketed 16.8 percent to stand at 641 pence midway through London trading on Monday after touching as high as 644 pence.
In Amsterdam, Akzo Nobel stock fell 1.90 percent to 60.41 euros, giving it a market value of about 17.6 billion euros (23.6 billion dollars).
"ICI Group can confirm that on 4 June 2007 it received an indicative proposal under which Akzo Nobel would acquire ICI for 600p (pence) per share in cash," a group statement said.
"The board of ICI considered this proposal and unanimously rejected it on the grounds that it significantly undervalues ICI," it added.
Akzo Nobel, which owns Crown Paints in Britain, said it believed that ICI would represent a highly attractive addition to its business following its sale of healthcare business Organon BioSciences for 11 billion euros (14.7 billion dollars) to US rival Schering-Plough in March.
"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," the Dutch group said in a separate statement.
Analysts are confident Akzo will return with a higher offer, with Akzo's move potentially opening up a bid battle with US chemicals giant Dow Chemical Co.
A 700-pence-a-share bid from Akzo is "a possibility", said a broker who wished to remain anonymous.
Citigroup (NYSE: C - news) experts meanwhile wrote in a research note: "We see consolidation in the global paints market as inevitable. ICI and Akzo Nobel are in robust financial health and seeking to accelerate growth via acquisitions." Collins Stewart (LSE: CLST.L - news) analyst James Knight said Akzo could pay up to 650 pence per share for ICI. "We view coatings consolidation as an opportunity, and not a threat, with considerable synergy potential, and have long seen ICI as the ideal target for Akzo," he added.
ICI sold its troubled flavours and fragrance unit, Quest, for 1.2 billion pounds late last year, leaving the slimmed-down group a better fit for any company wanting to expand into the highly lucrative coatings business, analysts noted.
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