Merrill Lynch ups ICI price target on turnaround

09 January 2007 11:22  [Source: ICIS news]

LONDON (ICIS news)--Merrill Lynch has increased its share price target for ICI to 515p ($10.01/€7.68) from 470p on the progress of its current turnaround, the firm said in a note to investors on Tuesday.  

 

Speculation was mounting that Akzo Nobel may bid to acquire ICI after its disposal of Organon.

 

This caused a surge in the UK company’s share price on Friday, although analysts said there were a number of other sources of potential upside for ICI shares.

 

Merrill Lynch said ICI’s expected announcement of new targets on 8 February should underpin higher profits from Paints and National Starch.

 

It added that the company would seek to use its cash-rich balance sheet following the Quest divestment to fund bolt-on acquisitions in developing markets.

 

“We estimate over 10% earnings per share (EPS) upside from a £1.8bn acquisition or close to 20% from buyback,” said the report.

 

Merrill Lynch sees ICI as a potential bid target due to its streamlined portfolio, lower pension deficit and net cash.

 

“Paints is a particularly attractive with its low capital intensity, strong brands and good local positions in growth areas such as Asia,” it added.

By: Mark Watts
+44 20 8652 3214

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