Readers' letters: ICI's demise

ICI's demise down to bad decisions

07 January 2008 00:00  [Source: ICB]

The sale of the UK's former bellwether, ICI, to Akzo Nobel has saddened many. For this former senior executive, the company's carving out of pharma division Zeneca marked the start of its decline.

ICI's demise down to bad decisions

I read with interest the letter sent by Paul Hodges and also your Commentary column about the current sad demise of the once-great ICI.

While I agree with much of the sentiment expressed, I think the point made about the reluctance to take risks - particularly during the 1990s - being a key factor in the decline of ICI does not really pinpoint what I believe to be the central reason for the impending disappearance of what used to be widely regarded as the bellwether of British industry.

For me, the beginning of the end of the renowned institution of ICI started in 1992, when ICI carved out its pharmaceutical division, which became Zeneca. The resultant decline in ICI's fortunes accelerated noticeably from the mid-1990s, after boardroom changes following the arrival of Charles Miller Smith, who joined ICI from Unilever in 1993. He served as CEO, then chairman, until his retirement in 2002.

Miller Smith's most sweeping move during his tenure was to go back to his old company in 1997 and spend a staggering £4.9bn ($9.7b, €6.7bn) on Unilever's specialty chemical business in a deal he hailed as the start of ICI's "transformation." I believe that history has already judged this purchase as ill-timed and vastly overpriced, subsequently leaving ICI as a distressed seller of its former bedrock commodities, in a bid to reduce the suffocating debt with which it had saddled itself.

This disposal process took almost 10 years, during which time ICI's share price dropped to less than £1, completely contrary to the intent articulated by Miller Smith and his board colleagues, to enhance shareholder value!

It is interesting to note that shortly after the split of the Zeneca business fully 15 years ago, ICI's shares were valued at just over £6, so the so-called shareholder value created between then and now based on the agreed takeover offer of £6.70/share by Akzo Nobel is less than 70p. Taking into account inflation, that is a miserable return by any standard. By contrast, Zeneca's share price also started life at about £6, but has been over £30 on a number of occasions.

So throughout the 1990s and the early 2000s, I don't think it was a case of ICI's managers being risk averse. In fact most of them - particularly in the Teesside area where all my ICI service worked - were completely preoccupied with carrying out the wishes of Miller Smith and his board to sell off the traditional businesses such as petrochemicals - on which ICI's past strength had been founded over an 80-year history.

Although this enforced task went completely against the grain for the vast majority of those managers, my abiding and positive memory is how those managers completed a task that was totally alien to them with dignity, professionalism and with an overriding aim to try to look after the future interests of thousands of loyal employees as much as they possibly could.

Robin Cook, Former Senior Personnel Manager for ICI, Teesside, UK, 1961-1993

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