Dutch chemicals group Akzo Nobel has agreed to buy Britain's ICI for 8 billion pounds ($16.2 billion) to create the world's biggest paint maker and retain its lead in industrial coatings.
Akzo raised its bid twice to secure a deal but still has to win its shareholders' support and faces opposition from at least one major investor, US fund TPG-Axon, a source close to the fund said.
"They're spending all their cash at the top of the cycle...and I don't think now is the time to be buying a business with exposure to the US housing market," the source told Reuters, adding TPG-Axon owns about 3.5 percent of Akzo.
Akzo, whose coatings are used on Airbus's A380 superjumbo, said on Monday it would pay 670 pence a share in cash for Imperial Chemical Industries (ICI), which makes Dulux paints. That is 22 percent above ICI's closing share price on June 15, the day before it announced a bid approach from Akzo.
At 1300 GMT, shares in ICI, Britain's biggest chemicals firm, were up 1.7 percent at 635 pence, around 5 percent below the offer price and reflecting some doubts whether Akzo shareholders will back the deal. Akzo shares were up 1.3 percent at 57.43 euros, as it sought to sweeten the deal for shareholders by saying it could return up to 3 billion euros to them from next year, on top of an existing cash return of 1.6 billion euros. In a side deal, German consumer products group Henkel will buy ICI's adhesives and electronic materials units for 2.7 billion pounds, conditional on Akzo buying ICI.
Buying ICI will give Akzo a market-leading position in paint and also allow it to retain its lead in industrial coatings, which was under threat from US group PPG Industries' plans to buy Dutch rival SigamKalon for about $3 billion. A combined Akzo-ICI will have about 15 percent of the world's $85 billion-a-year coatings industry, versus about 10-percent for PPG-SigmaKalon, and will boost Akzo's position in North America and fast-growing emerging markets.
Akzo is side-stepping the current turbulence in debt markets by paying for the deal with proceeds from the 11 billion euro sale of its Organon drugs unit to Schering-Plough Corp Akzo Chief Executive Hans Wijers said he had not been able to talk to shareholders about the details of the deal prior to a formal announcement, but was confident they would support it. "I am convinced that now we are able to be open about the facts to our shareholders that we will be able to convince our shareholders," he told a news conference.
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