The move - in effect a takeover by the Dutch company - will create Europe's biggest paint maker with brands such as Crown, Berger and Sikkens. It will push Britain's ICI, which owns the Dulux label, into second place in the sector.
The combined group, to be called Akzo Nobel, will have total sales of about pounds 7bn and net profits of about pounds 250m. It will span more than 50 countries and have a 75,000-strong workforce. According to industry estimates, it will have about 20 per cent of the European paints market, against ICI's 15 per cent.
Aarnout Loudon, chairman of Akzo, said the merger was 'almost a perfect fit'. The new group's activities will range from the manufacture of coatings, salt and bulk chemicals to pharmaceuticals and fibres.
However, the driving force behind the deal was to create a big chemicals business at a time when the industry is expected to undergo a massive restructuring because of deep recession and over-capacity in some chemicals sectors.
Despite their expected strong position in paints, the two companies believe the merger will be cleared by the European Union's competition authorities.
The combined coatings business will have total sales of almost pounds 500m - 80 per cent generated in Europe and the balance largely in Latin and North America.
Akzo is offering two shares for every 57 Nobel shares, valuing the company at about 29.6 krone each. Akzo also plans to redeem the Swedish group's estimated pounds 120m of preference stock, mostly held by the Swedish government.
Akzo is also raising pounds 460m in an international equity issue to fund a cash alternative to its terms.
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