Speculation grows on takeover of ICI

Takeover speculation surrounding chemicals company ICI has been fuelled by a major fund- raising deal involving a potential suitor.

Takeover speculation surrounding chemicals company ICI has been fuelled by a major fund- raising deal involving a potential suitor.

Shares in the Dulux paints maker surged 6% after Netherlands-based Akzo Nobel said it had agreed to sell its pharmaceuticals unit Organon BioSciences to Schering-Plough for £7.47bn. They closed 4.68% up at 464.5p yesterday.

ICI used to employ 30,000 staff in the North-East, but sold its last Teesside plant last year and now only has the Hammerite paint factory at Prudhoe, Northumberland, with 150 workers.

Analysts took the view that the move by Akzo Nobel gave it the firepower to buy ICI, which was worth £5.5bn at the start of trading yesterday.

Akzo had previously considered a partial flotation of the division, which specialises in the development and delivery of prescription drugs.

It said that it would now look to grow in the "most attractive areas" of its coatings and chemicals portfolios through investments and acquisitions.

James Knight, an analyst at Collins Stewart, said the disposal meant there was now a 50% chance of an ICI offer, up from the 25% seen previously. He believed Akzo could pay up to 600p for ICI, valuing it at around £7.15bn.

Mr Knight added: "We stick with our logic that a bid for ICI would make perfect strategic sense.

"It is do-able from a regulatory perspective, and now do-able financially. Synergies, particularly in raw material purchasing, would be significant."

The City has been on ICI bid alert after two disposals last year cut its debt mountain and pension deficit, as well as focusing the group on areas of strength such as paints, adhesives and speciality chemicals.

The disposals included the £1.2bn sale of its flavours and fragrance operation, Quest, to Swiss industrial group Givaudan.

The bid speculation has caused ICI shares to soar to their highest level since late 2000.

Akzo Nobel, which was created following a merger of industrial groups Akzo and Nobel in 1994, has targeted the UK market in the past after acquiring Courtaulds in 1998. The deal added a specialist in paints and man-made fibres.

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