ICI opens books to Akzo after raised $16.3 billion bid

By Miyoung Kim

LONDON (Reuters) - Dutch chemicals group Akzo Nobel (AKZO.AS) has won access to Imperial Chemical Industries' ICI.L books after raising its indicative bid for the British maker of Dulux paints to 8.0 billion pounds ($16.3 billion).

The two firms said on Monday that Akzo, which has teamed up with German consumer goods firm Henkel (HNKG_p.DE) for the bid proposal, was now offering 670 pence a share in cash, up 3 percent from the 650 pence a share rejected by ICI last week.

Buying ICI would strengthen Akzo's leading position in the world's $85-billion-a-year coatings industry, giving it a market share of about 15 percent and increasing its exposure in North America and emerging markets, as well as in decorative coatings.

But some analysts think Akzo, which makes Crown paints, is offering a full price and could face opposition from its shareholders. It could also face a bid battle, after a source familiar with the matter told Reuters last week that U.S. group Dow Chemical (DOW.N) was interested in bidding for ICI.

"The biggest hurdle remains approval of the deal by Akzo shareholders. We estimate the chances are better than evens, but difficult to call," Collins Stewart analyst James Knight said.

At 1055 GMT, ICI shares were up 1.3 percent at 640 pence. Akzo rose 0.4 percent, while Henkel fell 1.1 percent.

Petercam analyst Jan Van den Bosshe said access to ICI's books was an important step as it could allow Akzo to identify more synergies. "More synergies can also make the bid price more acceptable to Akzo shareholders," he wrote in a research note.

Akzo first proposed a bid at 600 pence a share for ICI in June, and then teamed up with Henkel, the maker of Persil detergents in Germany, for its last two proposals.

If the deal goes ahead, Henkel will buy ICI's adhesives and electronic materials units for 2.7 billion pounds, around the top end of market forecasts.

Britain's Takeover Panel has set Akzo a deadline of Thursday to make a firm offer for ICI or walk away.

Sources familiar with the matter said both sides were aiming to reach a deal by then, but ICI had not ruled out asking for an extension or removal of the deadline.

ICI said it had granted "limited" due diligence to Akzo and the process would be completed within a few days.

GETTING CHEMISTRY RIGHT

Under the proposed offer, ICI shareholders would also receive a second interim dividend of up to 5 pence paid on a pro rata basis from July 1 to the date of completion.

The firm, Britain's biggest chemicals company, has long been tipped as a bid target after slimming down to focus on higher-margin paints and adhesives.