UK Regulator Says Akzo Must Bid For ICI By Aug 9

Akzo Nobel NV (AKZOY) must either make an offer for Imperial Chemical Industries PLC (ICI.LN) or declare that it won't by August 9, the UK Takeover panel said Friday.

The UK Takeover Panel, which is Britain's takeover watchdog, issued the ultimatum after discussions with both parties' advisers. In a statement issued to the London Stock Exchange the regulators said the Dutch company must state its intentions regarding U.K. rival ICI by 5pm on 9 August.

In early June, Akzo Nobel, the world's largest coatings company by market share, made an indicative offer for ICI of 600p per share in cash, valued at GBP7.2 billion (EUR10.65 billion), an offer that ICI rejected on grounds that it "significantly undervalues ICI."

The Takeover Panel said in its statement that each party has accepted the watchdog's ruling. Both Akzo Nobel and ICI declined to comment Friday on the matter.

A trader who asked not to be identified said the regulator's "put up or shut up" ruling places Akzo Nobel on the back foot and indicates that Akzo is still interested, otherwise the meeting with the panel would have resulted in Akzo walking away. The trader said he therefore expects a raised bid from Akzo.

Another trader, who also asked not to be identified, noted media reports Friday that ICI had requested the deadline be set. He said the move seems aimed at getting Akzo to bid higher than its initial indication of 600p per share, and that price talk in the market is now over 650p.

Akzo Nobel is well cashed-up, after having agreed the sale of its OrganonBioSciences unit to Schering-Plough (SHP) for $11 billion cash.

Nonetheless, analysts were mixed as to what Akzo Nobel will do next.

Some, like Tom Muller at Gilissen and James Knight at Collins-Stewart, believe Akzo will raise it's offer. Knight reckons the next bid for ICI will be around 650p, while Muller says it could be as high as 700p.

Muller and Knight both said Akzo needs to make a significant acquisition, and that ICI seems the most logical and complementary target. If Akzo doesn't come back with a new offer, it risks becoming a takeover target itself, they added.

Rabo Securities analyst Mark van der Geest thinks Akzo should use the cash from the sale of its pharmaceuticals unit for smaller, less complicated acquisitions targets as well as return cash to shareholders. Van der Geest doesn't think Akzo Nobel will raise it's offer for ICI.

"The indicative offer of 600p, made in early June, was more than enough for ICI and any higher bid, will destroy value for shareholders," said Van der Geest.

Akzo Nobel has long been seen as interested in ICI, which it has said in the past "represent a highly attractive addition to its focused coatings and chemicals business."

After ICI rejected its indicative offer in June, Akzo said there was no certainty it would present a fresh proposal to ICI.