Akzo Nobel Tries Again For ICI

THE POTENTIAL takeover of U.K. specialty chemical company ICI is becoming increasingly complicated. Akzo Nobel, which had its earlier bid rejected by the ICI board, has come back with an improved offer. And the Dutch company has been joined by German detergents and adhesives producer Henkel, which would take several ICI businesses under the joint offer.

Adding to the mix are media reports that Dow Chemical and India's Reliance Industries are also looking into making bids for ICI.

Akzo Nobel's latest proposal offers 650 pence—roughly $13—per share, up from the 600 pence it offered in June. This new bid values ICI at about $15.8 billion. Henkel would take the adhesives and electronic materials businesses of ICI subsidiary National Starch & Chemical, leaving Akzo with what it really wants: ICI's Dulux paints division. Combining Dulux with its own coatings division would give Akzo a roughly 10% share of the global paints and coatings industry, although it would most likely have to sell off some coatings operations to satisfy antitrust objections.

ICI's sales from continuing operations in 2006 were $8.9 billion. Of that, half was generated by paints, 41% by National Starch, and the remainder by an assortment of regional operations. National Starch is composed of four major businesses: adhesives, specialty starches, specialty polymers, and electronic materials. Henkel's take would be about 26% of ICI's total.

Henkel has stepped in once before to help clinch a problematic takeover bid. In 2000, the German firm teamed up with San Diego-based Invitrogen in a $1.9 billion bid for Dexter Corp. and its Life Technologies subsidiary. Invitrogen wanted Life Technologies; Henkel walked away with Dexter's electronic materials, adhesives, and resins businesses.

For now, ICI has rejected the improved offer. "We are talking with Akzo Nobel," ICI CEO John McAdam says. "But we have not opened our books to them. We won't do that until they come up with an offer the board can recommend to shareholders."

And many of the company's major shareholders are supporting McAdam. For example, Richard England, press manager for Standard Life Investments, which holds just under 6% of ICI's shares, confirms that his company is "comfortable with ICI's decision to turn down the bid from Akzo Nobel."

On the other hand, Akzo CEO Hans Wijers is under pressure from his own shareholders not to overpay for ICI. He has pledged to remain "financially disciplined" in any acquisitions. Analysts question whether Akzo would be willing to improve its bid again.

Akzo is under an Aug. 9 deadline set by Britain's Takeover Panel to "put up or shut up" with a formal bid. If the company doesn't come up with a bid by that time, it is precluded from making one for six months.