UPDATE: Bidding war expected for ICI - analysts

18 June 2007 12:13  [Source: ICIS news]

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By Nigel Davis

LONDON (ICIS news)--Counter bids for ICI were expected following Akzo Nobel’s offer of 600p a share or £7.2bn for the UK-based paints and specialty starch maker, financial analysts said on Monday.

An offer in excess of 630p per share would be required, Jeremy Batstone of stockbrokers Charles Stanley said in a note to clients.

ICI could ultimately fall to an offer of as much as 700p a share, he added, given the possibility of a bid battle developing between Akzo and Dow Chemical or other interested parties, including BASF and Reliance.

ICI on Monday rejected Akzo Nobel’s offer.

Akzo said ICI would represent a highly attractive addition to its focused coatings and chemicals business following the announced sale of pharmaceuticals arm Organon BioSciences to Schering-Plough earlier this year for €11bn.

It was unclear, however, whether the company would respond to ICI's rejection with a higher bid.

“Akzo Nobel will continue to evaluate all strategic opportunities, including ICI, based on a disciplined and value-driven approach to earnings and returns over cost of capital,” the company added in a statement.

Chemicals analyst Charles Bailey, of Brewin Dolphin, said he fully expected Akzo Nobel to come in with a counter bid.

“All the synergies make sense,” Bailey said. “Akzo have €15bn in the bank and ICI are a restructured company with good geographic exposure and impressive brands in the coatings industry.”

Bailey said a bidding war could drive the price up to 700-750 pence per share.

A successful bid from Akzo Nobel might be expected to prompt an anti-trust investigation in the UK into the position of ICI’s Dulux and Akzo Nobel’s Crown paint brands, Batstone said.

The European coatings market, however, appears sufficiently fragmented to suggest only limited anti-trust issues, he said.

ICI'S shares were at 640 pence in late morning trading, rising about 17% on Friday's close

($1 = €0.75/£0.51)

Mark Watts contributed to this article

By: Nigel Davis
+44 20 8652 3214

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