Recommended cash offer for Imperial Chemical Industries PLC by Akzo Nobel N.V.
August 13, 2007
ARNHEM, 13 August 2007 - The Board of Management and Supervisory Board of Akzo Nobel N.V. and the Board of Imperial Chemical Industries PLC are pleased to announce that they have reached agreement on the terms of a recommended cash offer by Akzo Nobel for the entire issued and to be issued share capital of ICI, including the ICI Shares underlying the ICI ADSs.
Under the terms of the Transaction, ICI Shareholders will receive 670 pence in cash for every ICI Share.
Before the Effective Date, ICI will declare a second ordinary interim dividend in relation to the period from 1 July 2007 to 31 December 2007 of 5 pence per ICI Share, provided that, if the Effective Date falls prior to 31 December 2007, such dividend shall be paid pro rata by reference to where the Effective Date falls between 1 July 2007 and 31 December 2007. For the avoidance of doubt, ICI Shareholders registered as such on the relevant record date will retain their entitlement to receive the first ordinary interim dividend of 4.95 pence per ICI Share declared on 2 August 2007.
The offer price of 670 pence for each ICI Share values the entire existing issued ordinary share capital of ICI at approximately £8.0 billion, and represents a premium of approximately:
22 per cent. to the Closing Price of 549 pence per ICI Share on 15 June 2007 (being the last Business Day prior to the announcement by ICI that it had received an approach from Akzo Nobel);
35 per cent. to the average Closing Price of approximately 498 pence per ICI Share for the six months ended 15 June 2007 (being the last Business Day prior to the announcement by ICI that it had received an approach from Akzo Nobel); and
44 per cent. to the Closing Price of 464 pence per ICI Share on 9 March 2007 (being the last Business Day prior to Akzo Nobel’s announcement in relation to the disposal of Organon BioSciences).
ICI Shareholders (other than Restricted Overseas Persons) will have the option of taking Loan Notes instead of cash.
In connection with the acquisition of ICI, Akzo Nobel has entered into an agreement with Henkel to sell all assets and liabilities comprising the business divisions known within the ICI Group as the “Adhesives Division” and the “Electronic Materials Division”, both of which form part of the “National Starch” business of ICI, for £2.7 billion (€4.0 billion) in cash (calculated on a debt and cash free basis and subject to certain adjustments). The transaction with Henkel is not a condition to completion of Akzo Nobel’s acquisition of ICI and will be implemented following the Effective Date.
AkzoNobel believes that the Transaction, in combination with the On-Sale, has a clear and compelling strategic and financial rationale for Akzo Nobel, with significant benefits for its shareholders and other stakeholders:
the Transaction provides the opportunity to create a global leader in coatings and one of the largest specialty chemicals companies in the world with complementary brands, assets and skills, and leading positions in attractive specialty chemicals markets;
the enlarged Akzo Nobel group will benefit from a diversified and broad geographic presence, a significantly strengthened decorative coatings business and highly attractive platforms for growth in emerging markets;
Akzo Nobel estimates full run-rate annual pre-tax operating cost savings in relation to the ICI paints business of €280 million (£189 million). In addition, Akzo Nobel expects to achieve synergies from increased sales across the combined portfolio; and
the proposed acquisition of ICI in combination with the On-Sale is expected to be: (i) as a whole, enhancing to earnings (see notes 1 and 2 below); (ii) generative of an internal rate of return meaningfully above Akzo Nobel’s weighted average cost of capital (defined as 8 per cent.); and (iii) EVA positive in year three following the Transaction (see notes 1 and 2 below).
Akzo Nobel views the appropriate capital structure for a specialty chemicals business to be one that supports a solid investment grade rating. Consistent with this objective, in addition to its existing share buyback programme of approximately €1.6 billion (£1.1 billion), Akzo Nobel is considering an additional return of capital to its shareholders of up to €3 billion (£2 billion) commencing in 2008, subject to shareholder approval, completion of the sale of Organon BioSciences and completion of the On Sale. It is Akzo Nobel’s intention to structure the additional return of capital in a tax efficient manner for its shareholders generally.
It is intended that the Transaction will be implemented by way of a court-sanctioned scheme of arrangement under section 425 of the Companies Act 1985. It is expected that the Scheme Document will be posted to ICI Shareholders on or around 24 September 2007.
The Scheme will be put to Scheme Shareholders at the Court Meeting and to ICI Shareholders at the ICI EGM. The Transaction is subject to the approval of Akzo Nobel’s shareholders and will be put to Akzo Nobel shareholders at the Akzo Nobel EGM. Subject to the satisfaction of the Conditions, it is expected that the Scheme will become effective during late November or early December 2007.
The directors of ICI, who have been so advised by Merrill Lynch and UBS, consider the terms of the Transaction to be fair and reasonable. In providing their advice, Merrill Lynch and UBS have taken into account the commercial assessments of the directors of ICI. In addition, the directors of ICI consider the terms of the Transaction to be in the best interests of the ICI Shareholders as a whole.
Accordingly, the directors of ICI intend unanimously to recommend that ICI Shareholders vote in favour of the Scheme and the resolutions to be proposed at the Court Meeting and the ICI EGM (or, if the Transaction is implemented by way of a takeover offer, that they accept or procure acceptance of such offer) as they have irrevocably undertaken to do in respect of their own beneficial shareholdings of 654,111 ICI Shares, representing (as at the date of this announcement) approximately 0.055 per cent. of the existing issued share capital of ICI.
Commenting on today’s announcement, Hans Wijers, CEO of Akzo Nobel, said: “I am delighted by this transaction which will be a transformational step in implementing our strategy. We will create a leading global coatings and specialty chemicals company with a diversified geographic presence and well developed access to fast-growing markets in Asia-Pacific, particularly China and Latin America. Through this combination, we will be able to realise significant synergies and create value for our shareholders. At the same time, our customers, employees, pension funds and other stakeholders will benefit from the size and reach of the enlarged group. The pre-agreed on sale of ICI’s Adhesives and Electronic Materials businesses to Henkel is entirely consistent with our promise of financial discipline and provides the added benefit of being able to return additional cash to our shareholders in the near future.”
Commenting on the Transaction, John McAdam, CEO of ICI, said: “The management and employees of ICI have done much to transform the performance of ICI over the last few years, putting in place a clear strategy and strong focus on operational excellence. ICI has leading market positions across its businesses and competitive strengths in emerging economies in Asia and Latin America, together with technically advanced products aligned to strong growth trends. However, Akzo Nobel has today made a compelling offer which delivers full value for ICI reflecting ICI’s strong future growth prospects and strategic opportunities. Accordingly, the ICI Board will be recommending shareholders accept the 670 pence cash offer from Akzo Nobel as it believes it to be in their best interests.”
Morgan Stanley is acting as financial adviser to Akzo Nobel. Merrill Lynch and UBS are acting as joint financial advisers and joint corporate brokers to ICI. Akzo Nobel is hosting an analyst presentation at 9.00 a.m. (London time) at the Great Eastern Hotel, 40 Liverpool Street, London, EC2M 7QN. The analyst presentation will be webcast live and can be accessed via Akzo Nobel’s corporate website at www.akzonobel.com.
To participate in the live question and answer session to be held after the presentation, analysts should dial +44 20 7190 1590. The webcast of the analyst presentation will also be available via Akzo Nobel’s corporate website at www.akzonobel.com after the presentation has concluded. Akzo Nobel is hosting a press presentation at 12.00 p.m. (London time) at the Great Eastern Hotel, 40 Liverpool Street, London, EC2M 7QN. The press presentation will be webcast live and can be accessed via Akzo Nobel’s corporate website at www.akzonobel.com. The webcast of the press presentation will also be available via Akzo Nobel’s corporate website at www.akzonobel.com after the presentation has concluded. This summary should be read in conjunction with, and is subject to, the full text of the following announcement and the Appendices. Appendix I sets out the Conditions and certain further terms of the Transaction. Appendix II contains information on bases and sources used in this announcement, Appendix III provides information in relation to certain irrevocable undertakings and Appendix IV contains definitions of certain terms used in this announcement. Notes: 1. Before purchase accounting for the Transaction. 2. This statement is not a profit forecast and should not be interpreted to mean that future earnings per share will necessarily be greater than those for the relevant preceding financial period.
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Dick Luijckx (Investor Relations) Tel: +31 26 366 4317 Tim van der Zanden (Financial Communications Officer (London)) Tel: +31 26 366 4343
Heleen van de Lustgraaf (Communications Manager (Holland)) Tel: +31 26 366 4343
MORGAN STANLEY & CO. LIMITED (Financial adviser to Akzo Nobel)
Tel: +44 207 425 8000: Simon Robey, Johannes Groeller, Jan Weber
SMITHFIELD (PR adviser to Akzo Nobel) John Kiely Tel: +44 207 360 4900
John Dawson (Vice President of Investor Relations & Corporate Communications) Tel: +44 207 009 5315 Regina Kilfoyle (Director of Corporate Communications) Tel: +44 207 009 5410
MERRILL LYNCH (Financial adviser and corporate broker to ICI)
Tel: +44 207 628 1000 Matthew Greenburgh Richard Taylor Michael Findlay (Corporate Broking) Ken McLaren
UBS INVESTMENT BANK (Financial adviser and corporate broker to ICI)
Tel: +44 207 567 8000 Robin Budenberg, Jonathan Bewes, Jackie Lee, James Archer