Dow Chemical may make counterbid for ICI: source

By Euan Rocha

NEW YORK (Reuters) - Dow Chemical Co. (DOW.N), the largest U.S. chemical maker, is considering making a bid for Britain's Imperial Chemical Industries Plc ICI.L, a source familiar with the matter said on Wednesday.

Earlier this week, ICI rejected an improved 7.8 billion-pound ($15.9 billion) or 650 pence-a-share takeover proposal from Dutch chemical group Akzo Nobel (AKZO.AS).

Dow has hired investment bank Lazard to advise on a possible counterbid, the source said.

However, a bid for ICI is not imminent and the possibility of an offer is merely being assessed, the source said.

A spokesman for Dow said the company does not comment on market rumors and speculation. A spokeswoman for Lazard was not immediately available to comment.

Shares in ICI were up 0.6 percent at 627.5p in London trade, while the DJ Stoxx European chemical index .SX4P was trading down 1.5 percent.

ICI, the maker of Dulux paints, has long been seen as a bid target after slimming down to focus on higher-margin paints and adhesives.

Analysts have said DuPont Co. (DD.N) of the United States, Germany's BASF AG (BASF.DE) and India's Reliance Industries Ltd. (RELI.BO) might also contemplate making a bid.

Spokesmen for BASF and DuPont said the companies do not comment on market rumors, while a spokesperson for Reliance was not immediately available for comment.

If ICI were to agree to a takeover, it would be the latest in a wave of acquisitions that the chemicals sector has recently witnessed.

Last month, U.S. chemical maker Huntsman Corp. (HUN.N) agreed to a $6.5 billion bid from Apollo Management's Hexion Specialty Chemicals, while Lyondell Chemical Co. LYO.N agreed to a $12.7 billion offer from Basell BASL.UL. In May, General Electric Co. (GE.N) sold its plastics business to Saudi Basic Industries Corp. (2010.SE) for $11.6 billion.

DOW STRATEGY

Dow has repeatedly stressed that it plans to invest in and grow its specialty chemical businesses, while adopting a less costly joint-venture strategy to grow its commodity chemicals businesses.

Midland, Michigan-based Dow has also set apart coatings as one of its key growth areas. ICI's assets would boost Dow's presence in the coatings arena and also give the company a foothold in the European coatings market.

However, HSBC analyst Hassan Ahmed said a bid from Dow would be unlikely, as a deal for ICI would be quite costly and cost savings from the deal would be hard to identify.