Azko investors warm to ICI takeover

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Akzo Nobel shareholders have warmed to an agreed £8.1bn acquisition of ICI, the UK chemicals company, following meetings between Akzo’s management and investors.

However, some investors warned that a further deterioration in global equity markets could force them to reconsider and possibly ask Akzo’s management to renegotiate the price.

Akzo, the Dutch conglomerate, visited shareholders in the UK early in the week to try to win them over, before travelling to continental Europe and the US.

Some shareholders still had reservations about the price Akzo had agreed to pay, in spite of seeing the deal as logical.

Shareholders, who asked not to be named, said the price Akzo was getting for ICI assets it plans to sell to Henkel, the German company, helped them conclude they would probably accept the price.

However, one warned: “If markets calm down then it’s fine, but if we continue to have sharp declines it will start to make the price they’re paying look very unreasonable.”

Akzo declined to comment on what proportion of shareholders appeared to be in favour of the deal, which will go to a vote in late October and will require 50 per cent approval of those voting to succeed.

“We have had very productive meetings with shareholders in the UK, Europe and US,” said Akzo.

The agreed price represents a 45 per cent premium to ICI’s price in mid-March, when Akzo’s sale of a pharmaceuticals business fuelled speculation about a bid for ICI.

If markets continue to fall there is a chance hedge funds will buy stock in Akzo, while shorting ICI shares.

Investors adopting this strategy would need to believe that Akzo’s share price would rise if the deal failed, though some see that as questionable.

Investors and analysts believe ICI’s share price will fall sharply if the deal collapses, given the market downturn since the deal was announced last week.

TPG-Axon, the US-based investor that owns 3.5 per cent of Akzo and has publicly opposed the deal, is understood to remain against it, along with at least two other smaller shareholders.

Other US-based investors – Paulson, Brandes and Dodge & Cox – are inclined to favour the deal.

Centaurus, the UK-based fund, is undecided. Each of the firms declined to comment.

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