ICI fuelled by takeover talk

Chemicals and paints giant ICI continued its stellar stock market performance today as further bid speculation surrounded the firm.

Shares have soared 36% in the last 12 months and closed yesterday at 461p - its highest level since late 2000. The stock advanced a further 2% today after broker UBS raised its price target to 470p.

The Dulux owner has been buoyed in the last few months by takeover talk with chemicals and healthcare products firm Akzo Nobel seen as a possible suitor.

The rumours intensified in November after ICI offloaded its second major business in less than six months.

Its Quest flavours and fragrances division was sold for £1.2bn (€1.8bn) to Switzerland’s Givaudan and followed the sale of its Uniqema consumer products arm for £410m (€607m).

While ICI saw the deals as a way to cut debt and its pension deficit, commentators also thought the move increased the chances of a takeover.

Themis Themistocleous, an analyst at UBS, said: “Akzo’s response to our question as to whether they would consider a bid for ICI was that they would look at all options and potential targets.”

But he suggested Akzo would have the financial resources to make a move and is keen to strengthen its decorative coatings position in Asia and Europe, as well as gaining a foothold in America.

However, Peter Cartwright, an analyst at Evolution Securities, warned against over excitement over the chances of a potential bid from Akzo Nobel.

He insisted a move for ICI is only “one possibility” which the firm could choose – while it may also decide to target just one division.

Aside from takeover talk, the business has performed well recently with underlying profits rising 10% to £144m (€213m) in the three months to September 30.

The update showed the firm had made steady progress, although it was tinged by a warning that raw material inflation continued to be a problem, while demand for paint in North America remained weak.

There has also been a welcome for ICI’s restructuring strategy, which includes plans to cut 2,300 jobs from its global workforce over a period of five years. The group employs around 4,000 people in the UK. ICI Dulux Paints Ireland employs about 150 people.