Akzo Nobel Sweetens Bid For ICI

The potential takeover fight for U.K. specialty chemical company ICI has entered a second round. Akzo Nobel, which had its earlier bid rejected by the ICI board, has come back with an improved offer???and reinforcements.

Akzo's latest proposal offers 650 pence???roughly $13.00???per share, up from its June offer of 600 pence, which valued the company at $14.2 billion. Akzo says it was able to raise the bid because it is buttressed by the support of German detergents and adhesives producer Henkel.

Henkel has signed an exclusivity agreement with Akzo to take the adhesives and electronic materials businesses of ICI subsidiary National Starch & Chemical if Akzo acquires ICI. The deal would allow Akzo to hold onto the prize it seeks: ICI's Dulux paint operations.

ICI's shares closed at 577 pence on Friday, July 27. That's significantly lower than the 700-pence-per-share value that ICI's managers and shareholders have argued the company is worth.

Henkel stepped in to help clinch a problematic takeover bid once before. In 2000, the German company teamed up with San Diego, Calif.-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 new offer from Akzo. The initial rejection, however, charged that the Dutch offer "significantly undervalued" ICI. Industry observers are making much of the latest rejection's softer language: The revised proposal "failed to recognize the full strategic value of ICI." Moreover, ICI noted that discussions with Akzo Nobel are continuing.

The Dutch company is still under an early-August deadline set by U.K. financial authorities to "put up or shut up" with a formal bid. Akzo's managers say only that the company is evaluating its options.