Painting a new picture
AKZO Nobel’s success in getting ICI to agree to its takeover offer will give ICI India’s shareholders a reason to smile.
By Ravi Ananthanarayanan & Supriya Verma, TNN |
MUMBAI: AKZO Nobel’s success in getting ICI to agree to its takeover offer will give ICI India’s shareholders a reason to smile. They are already in a sweet spot, as soaring demand for paints, better realisations and a cash-rich balance sheet have led to ICI’s shares gaining 75% in a year to Rs 530. A proposed buyback at a price of up to Rs 575 per share also sets a floor below which the price will not fall.
Akzo’s bid is a good news not just for the inevitable open offer. The Dutch coatings major cites ICI’s strong presence in emerging markets as one of the key reasons for the acquisition. If its filings, which talk about ICI’s No 3 presence in India and the low penetration of paints in the country, are any indication, India has a key role to play in the scheme of things.
The acquisition will not materially alter ICI’s position in the market though, since Akzo Nobel does not have a presence in the decorative segment. It, however, is present in the auto refinish, non-stick coatings, and industrial coatings segments. With minimum overlaps in India, it would appear that they would continue to function as independent entities.
Akzo’s decision to sell the National Starch adhesives business to Henkel will affect ICI India though. The adhesives and polymers segment contributed just 10% to sales during 2007, so sales and profits from operations will decline to some extent.
ICI will become a company almost exclusively focused on paints. It will get cash from the sale of the adhesives business, which will add to the already large cash chest of Rs 800 crore. With their position so secure, further gains to ICI’s shareholders can accrue only if Akzo plans to delist ICI and offers a hefty premium in the process, or better still, uses the cash to acquire a domestic paint company and become a much larger player.
Akzo’s bid is a good news not just for the inevitable open offer. The Dutch coatings major cites ICI’s strong presence in emerging markets as one of the key reasons for the acquisition. If its filings, which talk about ICI’s No 3 presence in India and the low penetration of paints in the country, are any indication, India has a key role to play in the scheme of things.
The acquisition will not materially alter ICI’s position in the market though, since Akzo Nobel does not have a presence in the decorative segment. It, however, is present in the auto refinish, non-stick coatings, and industrial coatings segments. With minimum overlaps in India, it would appear that they would continue to function as independent entities.
Akzo’s decision to sell the National Starch adhesives business to Henkel will affect ICI India though. The adhesives and polymers segment contributed just 10% to sales during 2007, so sales and profits from operations will decline to some extent.
ICI will become a company almost exclusively focused on paints. It will get cash from the sale of the adhesives business, which will add to the already large cash chest of Rs 800 crore. With their position so secure, further gains to ICI’s shareholders can accrue only if Akzo plans to delist ICI and offers a hefty premium in the process, or better still, uses the cash to acquire a domestic paint company and become a much larger player.
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