23 November 2006 14:04 [Source: ICIS news]
LONDON (ICIS news)--Deutsche Bank said on Thursday that it has increased its target share price for Imperial Chemical Industries (ICI) to 475p ($9.09) from 440p due to the company divesting its flavours and fragrances business Quest for a better than expected price.
On 22 November, ICI sold Quest to Switzerland-based Givaudan for £1.2bn stating that the proceeds would be used to pay down pension liabilities and fund acquisitions in the group’s core areas.
Deutsche Bank said the price represents an excellent exit multiple of 15 times the company's estimated operating profits before depreciation and amortisation (EBITDA) for 2006 and 12 times the estimated EBITDA for 2008.
“The cash in has allowed ICI to reduce its pension burden while giving the group flexibility to further strengthen the highly cash generative paints and adhesives business,” said the bank’s report.
“While there is now some acquisition risk attached to ICI, this is more than offset by the possibility of ICI itself becoming a bid target.”
Deutsche Bank warned that the main risks to its ICI target price is a significant change in the status of the group’s pension fund and a sharp slowdown in the ?xml:namespace>
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