ICI shares rise on the back of Akzo Organon sale

12 March 2007 11:48  [Source: ICIS news]

By Mark Watts

(Updated with latest share price)

LONDON (ICIS news)--ICI shares surged over 8% to £5.03 (€7.41/$9.77) on Monday morning after Akzo Nobel announced the sale of its pharmaceuticals unit for €11bn, leaving it with a large war-chest for potential acquisitions.

However, by late-afternoon trading in London ICI shares had fallen back to £4.87, up by nearly 5% on Friday’s close.

Synergies between the two companies’ product lines and Akzo’s new buying potential have fuelled speculation on a takeover bid for ICI.

The Dutch group had announced plans to sell Organon BioSciences to US pharmaceutical group Schering-Plough for €11bn, dropping plans to issue an initial public offering.

Brewin Dolphin analyst Charles Bailey said the €11bn Organon sale was far higher than expected and that Akzo would be much more likely to make a substantial acquisition in the short-term.

“This is good news for Akzo. It has had a lot of issues over drug tests and now the stigma has gone it can concentrate on expanding a highly successful chemicals business,” he said.

He added that Akzo sees strong synergies between the two companies, with ICI's strong position in emerging Asian markets an attractive expansion for the Dutch company.

UBS in a note to clients said the Organon sale was €3.2bn more than it estimated, adding that acquisitions continued to be the main target with the proceeds.

“We like the idea of a big, global leader in coatings, as long as the acquisitions are done at sensible prices, which we believe is likely to be the case," the bank's analysts said. 

ICI has been more vulnerable to a bid since selling off two of its four business units within the last year.

In November 2006 it agreed to sell Quest flavours and fragrances to Givaudan for €1.2bn and divested Uniqema for nearly €600m in September.

KBC Securities raised its target price for Akzo to €60 from €48, saying the divestment price was much higher than expected.

“Akzo will have larger war-chest than it would have gained with an IPO and can now make acquisitions almost immediately instead of waiting for years after a flotation,” said KBC analyst Wim Hoste.

($1=€0.76)

By: Mark Watts
+44 20 8652 3214

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