Akzo allowed more time to make formal offer for ICI

11 August 2007

Britain's Takeover Panel has extended the deadline it has set for Dutch chemicals and industrial coatings maker Akzo Nobel NV to make a firm offer for Imperial Chemical Industries PLC (ICI), as the two companies are still in takeover talks. Due to expire at 5 pm on 9 August, the deadline has now been extended to 10 am on Monday 13 August.

The two companies remained in talks about preconditions to the offer, and the due diligence was not yet complete. Akzo got access to ICI's books only on Monday 6 August, after it raised its buyout bid. Under British takeover laws, Akzo will be barred from making another offer for the company for six months if it fails to make a formal offer before the deadline expires, unless a rival buyer come up with a bid.

Akzo also confirmed that its indicative proposal remained at £12 billion ($24.49 billion, €17.97 billion), or 670 pence ($13.67; €9.93) a share plus dividends. Akzo upped its offer after ICI, the maker of Dulux paints, rejected its earlier £8 billion ($16.3 billion, €11.7 billion) offer. The Dutch company made its first approach in mid-June at 600 pence per share, and at the end of July lifted that proposal to 650 pence.

The Crown Paints maker wants to add ICI's Dulux brand and paint business to its own and sell ICI's adhesives business to German chemical giant Henkel KGaA for £2.7 billion, saying the tie-up would allow more cash to be returned to shareholders. The price is £1 billion more than analysts expected. The deal with Henkel reduces the enterprise value-to-EBITDA multiple Akzo is paying for ICI from 12.3 to 10.9. Taking over ICI would give Akzo about 15 per cent of the global paints market. The purchase would boost the Arnhem-based company's revenue by 40 per cent to around €18.25 billion ($25 billion, £12.35 billion).

Akzo has been looking to invest some of the cash it holds from its recent $14.4 billion sale of Organon Biosciences NV to Schering-Plough Corp. That was the largest of a number of divestments Akzo made after it decided to focus on chemicals, coatings and animal healthcare. Some investors feel the price Akzo is offering for ICI is much too high. Others, however, feel rival bids cannot be ruled out. Among the names being mentioned in this context are US conglomerate Dow Chemical and India's Reliance Industries.