Akzo Nobel, the world's biggest paint maker, on Tuesday said it was willing to spend "a considerable amount of money" on an acquisition, sparking renewed speculation that it may be mulling a move for ICI, of the UK.
The Dutch coatings and chemicals company, which agreed last month to sell its pharmaceutical division to Schering-Plough, of the US, for €11bn in cash, said it was "looking at a long list of potential [acquisition] candidates".
Part of the proceeds from the sale of Organon Biosciences will go to shareholders in a €1.6bn buy-back launched next week, the first in the company's history. Akzo also intends reducing a €2bn UK pension deficit, Rob Frohn, chief financial officer, said.
However Mr Frohn made clear that Akzo would retain significant financial firepower for acquisitions. "With the sale of Organon Biosciences we will get a considerable amount of cash, so in principle we are willing to spend that sort of money," he said.
While declining to name specific targets, he said decorative paints – an area in which ICI specialises – was a "highly fragmented [sector] that offers most opportunities for consolidation". Analysts believe Sherwin-Williams, the US paint maker, is also a potential target.
Akzo's cash-pile makes it vulnerable to a private equity buy-out, analysts said, even though proceeds from the OBS sale will not be banked until later this year when the Schering-Plough deal is expected to close.
But Mr Frohn said the company was not under pressure to rush into a deal, although it was aware that "having an enormous amount of cash on the balance sheet is value destructive and no shareholder will tolerate that".
In its first results statement since the pharmaceutical unit sale, Akzo exceeded analysts' expectations. It weathered raw material and energy price rises and a currency headwind to post first-quarter earnings before interest and tax of €219m, 18 per cent above the same period a year earlier, as sales from continuing operations rose one per cent to €2.5bn.
Akzo shares rose 3.55 per cent to €59.18 in early trade.