Shareholders mollified by extra dividends and share buyback

Akzo Nobel chairman Hans Wijers today gave more detailed plans on the new chemicals giant that would form should the company’s proposed acquisition of ICI go ahead.

With Akzo shareholders set to vote on whether to approve the acquisition at an extraordinary general meeting on 5 November, the announcements appeared mainly aimed at reassuring them about the deal. Certain Akzo shareholders have voiced concerns that, at 670p per share, the Dutch firm are paying too much for ICI.

Akzo shareholders are now set to reap extra benefit from the deal, with future dividends increased to a minimum 45 per cent of net income, up from the current 30-40 per cent. In addition, the company will launch a two billion-Euro share buyback scheme in the second half of 2008.

The announcements follow ’intensive shareholder discussions,’ said Wijers. ’The dividend is key for certain shareholder groups. I feel we’ve achieved positive momentum in our shareholder base since mid-August [when the ICI deal was announced].’

Wijers continued to stress the cost savings the new company would realise through synergies - which the company predicts will reach €2.5 billion after implementation costs. ’85 per cent of these synergies will be realised within three years,’ he added, ’with R&D consolidation taking the longest, at four to five years.’

A new company 

Plans for running the new company are also beginning to emerge. ’Our ambition is to retain key ICI management, at various levels,’ said Wijers, who described the ICI management as ’significantly better than we are in certain areas.’ Akzo plans to have the top management team in place by the time the deal closes on 2 January 2008.

’We are currently looking at the new company name, and at branding - although certain brands like Dulux will obviously remain,’ said Wijers.

As part of the deal, Akzo has agreed to sell just over half of ICI’s US National Starch subsidiary - the adhesives and electronic materials section of the company - to German consumer chemicals supplier Henkel, for ?2.7 billion. Akzo also plans to sell ICI’s specialty starch business, but to retain its specialty polymers operations as a good fit with Akzo’s existing chemicals business.

James Mitchell Crow

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