Merrill Lynch lifts its ICI target price 9% to 585p

12 April 2007 12:08  [Source: ICIS news]

LONDON (ICIS news)--Merrill Lynch has raised its target share price for ICI by 9% to 585 pence, the bank said on Thursday.

The move reflected the increased probability of a high bid approach as well as scope for sensible use of the now much stronger balance sheet, its analyst added.

ICI is an attractive takeover candidate because of its exposure to growth markets such as Asia and Latin America; its genuine specialty portfolio; and its net cash and lower pension deficit position, Merrill Lynch said

The paints and specialty starches producer could generate net cash of £365m ($716m) in 2007, according to Merrill Lynch estimates (compared with a net debt in 2001 of £2.9bn) and with its pension deficit down to an estimated £880m in 2007 from £1.7bn in 2005 looks more easily digestible for a potential partner, it added.

There is more upside for an independent ICI also, the bank suggested, driven by higher margins and acquisitions or share buy-backs.

ICI’s shares rose sharply on the London Stock Exchange on 2 April on renewed rumours of a possible bid approach.

The share price was 530 pence at 10:23 GMT on Thursday compared with 350 pence at the start of April last year.

($1 =  £0.51)

By: Nigel Davis
+44 20 8652 3214

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