ICI rejects bid by Akzo Nobel
Imperial Chemical Industries, Britain’s largest specialty chemical maker, said today that it had rejected a takeover bid from Akzo Nobel worth £7.2 billion, or $14 billion, as too low. Akzo, the world’s largest maker of paints and coatings, earlier this month offered to pay £6 for each ICI share. The shares jumped 16 percent, to £6.38, their highest level in eight years, in London trading today, valuing ICI at £7.6 billion as investors expected Akzo to increase its bid. Akzo said today that it would continue to evaluate all strategic opportunities, including Imperial.
Akzo has sufficient cash for a larger acquisition after it sold its drugs unit Organon in March to Schering-Plough, the American drug maker, for $14.4 billion. After the sale, some analysts had said Akzo was under pressure to make an acquisition or risk becoming a takeover target itself.
Andrew Benson, an analyst at Citigroup in London, said Akzo and Imperial are both “well placed to participate in consolidation” in the global paints market and that “both could buy the other” but that Akzo was more likely to be the suitor because it is financially stronger. A combination could result in cost savings of £120 million, he said.
BASF, the German chemicals company, or Dow Chemical, a United States rival, may also be interested in Imperial, though Akzo would be able to pay more, analysts have said.
Consolidation in the coats and paintings industry is expected to intensify as companies are looking for growth in a market that is among the most fragmented, with the top 10 companies together having a 50 percent share. Akzo has the biggest market share with 10 percent, followed by Sherwin-Williams. Steady cash flows also make the industry attractive for private-equity buyers, driving up valuations.
Buying Imperial would give Akzo businesses in Asia and America and help it profit from growing demand for coatings in regions like Eastern Europe and Asia. Shares of Imperial had gained 19 percent this year, in part because investors viewed the company as a takeover target after some earlier asset sales had reduced debt.
John McAdam, Imperial’s chief executive, had focused on household paints, coatings and varnishes, cut jobs and started to reduce a pension deficit. Last year it sold its fragrances division to Givaudan of Switzerland and its beauty-products business to Croda International in Britain.
(Published by The New York Times, June 18, 2007)