Akzo Nobel plays down gathering Organon interest

04 January 2007 12:10  [Source: ICIS news]

LONDON (ICIS news)--Akzo Nobel on Thursday denied it planned to sell its Organon drugs business to private equity instead of going ahead with its planned initial public offering (IPO).

Financial analysts, however, suggested that the sale of either or both the Organon human healthcare and the Intervet animal health businesses to private investors was highly likely and continued to eye a possible approach from the Dutch chemicals firm for ICI.

Akzo Nobel has bundled Organon and Intervet together into Organon Biosciences ahead of the proposed Organon Biosciences IPO.

"The preferred option is still an IPO," said an Akzo Nobel spokeswoman, adding that the newspaper report by Dutch business daily Het Financieele, saying that at least two consortia of investors were invited to make an offer in the coming weeks, was pure speculation.

However, analyst Danny van Doesburg at SNS Securities said the statement from Akzo Nobel could be a political one, as legally the company is obliged to say its preferred option is an IPO.

He added that a full or partial sale to private equity was still a possibility and could be linked to a possible offer for UK coatings firm ICI, which there has been speculation about among analysts since Akzo Nobel’s chief financial officer called it a beautiful company late last year.

Interest from private equity to buy the €8bn ($10.5bn) Organon Biosciences business would be based completely on market valuations, as they would not be allowed to perform due diligence on the business, Doesburg said.

But he added that a potential input from private equity firms would help Akzo with a possible acquisition of ICI.

SNS Securities’s current target share price for Akzo Nobel is €47.50, with a possible upside to €52.

Analyst Mark van der Geest, of Rabo Securities, said widespread interest in pharmaceutical industry consolidation would make it easier to sell Organon.

Akzo Nobel chief executive, Hans Wijers, was obliged to seek for shareholders the best value for the business, he stressed.

Van der Geest believes Akzo Nobel could use proceeds from the sales of  Organon and Intervet to make an offer for ICI.

“ICI is a very attractive acquisition candidate,” he said, but added that acquisition of the coatings and starch-based specialities company cold be financially demanding for the Netherlands based group.

A sale of Organon and Intervet to private equity could also facilitate further sector restructuring within two or more years, he suggested, with possible interest from drug makers from Europe and Japan.

Rabo Securities on Thursday raised its Akzo Nobel share price outlook from €44 to €50 and reiterated its ‘hold’ recommendation.

Akzo Nobel shares were trading at €48.03 at 11:02 GMT, up 1.33% on the day.

$1 = €0.76

(Nigel Davis contributed to this article)

By: Hilde Ovrebekk
+44 20 8652 3214

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