Imperial Chemical Industries has rejected a 7.2 billion-pound ($14.2 billion) takeover approach from Akzo Nobel NV, saying it undervalued the company.
AMSTERDAM/LONDON: Britain's biggest chemicals firm, Imperial Chemical Industries, has rejected a 7.2 billion-pound ($14.2 billion) takeover approach from Akzo Nobel NV, saying it undervalued the company.
ICI shares jumped more than 15 per cent to 635 pence in early trade on Monday after it had turned down the proposal that valued ICI at 600 pence per share.
Akzo shares were trading 1.4 per cent down at 60.75 euros, as Rabo Securities analysts said a bid of 600 pence or above would be value-destroying for the Dutch company's shareholders.
Analysts have said buying ICI would give Akzo Nobel better emerging-market exposure and help it fix its underperforming European decorative business, with minimal antitrust issues.
Akzo's best-known paint brand in Britain is Crown Paints, while ICI owns Dulux.
"Akzo Nobel will continue to evaluate all strategic opportunities, including ICI, based on a disciplined and value-driven approach to earnings and returns over cost of capital," Akzo said in a statement.
Akzo said there was no certainty it would make a further proposal to ICI or that any offer would result.
Asked whether Akzo was eyeing other takeover targets, a spokesman said the company was always looking at acquisition opportunities.
Apart from ICI, Valspar and Sherwin-Williams are among Akzo's likely takeover targets, analysts have said.
Speculation of a bid for ICI grew after Akzo sold its drugs unit in March for 11 billion euros ($14.7 billion). Analysts had said the company needed to act fast in spending the proceeds to avoid becoming a takeover target.
"With the cycle nearing the peak, we believe that other chemical companies will look at ICI as a way of broadening product geographic exposure," JPMorgan Cazenove said in a note.
"With no shortage of likely interest, and a robust ICI response, the pressure on the share price will likely be upwards." US group Dow Chemical and Germany's BASF have also been tipped as possible bidders for ICI.
The coating industry is very fragmented, with Akzo Nobel only accounting for around 9 per cent of global market share and the addition of ICI could potentially close the gap in its decorative coatings geographical coverage in the US, Asia and Latin America, UBS said in a recent report.
Akzo said it would continue its 1.6 billion-euro share buyback launched on May 3 and would evaluate tax-efficient options of returning cash to shareholders.
ICI has pension liabilities of 9.2 billion pounds and its pension deficit now amounts to around 850 million pounds.
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