Market Report: Akzo Nobel heads the quest to take over ICI

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The Independent Online

Since ICI sold its Quest flavours and fragrances business in November, the group has constantly been talked of as a takeover candidate, with Akzo Nobel seen as the most likely buyer. Yesterday, the stockbroker ING put out a piece of research arguing that such an outcome is indeed very much likely, although it warned that it is difficult to say when exactly it might happen.

The broker said: "Much of the speculation surrounding a bid for ICI centres on Akzo Nobel. In many ways, the pieces of the jigsaw fit together very well and the concept is certainly plausible in our view."

The Dutch group already has the largest coatings business globally and by acquiring ICI's paint operation it would have an unparalleled position. Although this combination would face some anti-trust issues, especially in the UK, ING believes that the deal would be approved by the relevant competition authorities. According to the broker's calculations, Akzo Nobel could pay up to 566p a share for ICI.

ING also suggested that a break-up bid for ICI from a private equity consortium is a possibility, but much less likely than a move on the group by Akzo Nobel. Financial buyers could be attracted by the £300m ICI has on its balance sheet after debt and pension liabilities are stripped out and the fact that there are few synergies between some of the group's divisions. ICI shares finished 1p higher at 479p.

InterContinental Hotels, which is also expected to lose its independence before the end of the year, jumped 45p to 1,300p on talk a bid for the group might be imminent.

IG Group dropped 0.75p to 283p before its interim results on Monday. The spread betting firm is expected to report a 43 per cent surge in pre-tax profits to £30m in the six months to 30 November. The growth will have been fuelled by a solid performance by its core financial betting business and by the positive effect of the World Cup and Ashes cricket series on its sports division.

Hikma Pharmaceuticals, which saw its shares slump on Thursday after a profit warning, suffered a further 23.75p loss to 361.25p as Citigroup slashed its rating on the stock to an outright "sell" from "hold" and set a price target of just 350p. The US broker pointed out that Hikma has disappointed the City on three occasions in the past six months and now looks like an increasingly risky investment.

JP Morgan argued that merger and acquisitions are likely to continue to be the main driver of share price gains in the tobacco sector going forward. In fact, the US broker said it expects one or two more significant deals to take place in the next six to 12 months. According to JP Morgan, Imperial Tobacco, off 2p to 2,062p, is best positioned to benefit from this situation and as a result upped its price target on the stock all the way to from 2,050p to 2,600p.

Japan Tobacco's bid for Gallaher at the end of last year sparked the latest round of bid speculation in the industry. BAT, however, is thought to be too big a player to be taken over. Even after yesterday's 25p drop to 1,503p, the group is valued at a mammoth £30.9bn.

Marston's, formerly Wolverhampton & Dudley Breweries, ticked 6p lower to 420.5p as brokers cleared a large seller from the market. Citigroup placed 4.5 million shares on behalf of a client at 415p.

Shares throughout the pubs sector have been boosted in recently months by hopes that many of the industry's biggest players would hive off their property assets into separately listed Real Estate Investment Trusts (Reits). City analysts have suggested that a move to the more tax-efficient Reit structure could create substantial value for shareholders. Elsewhere in the sector, Greene King rose 10p to 1,070p, Punch Taverns put on 17p to 1,183p and Enterprise Inns jumped 9p to 667p.

Aberdeen Asset Management ticked 5.25p higher to 198.25p on news that its funds under management grew by 3.4 per cent in the final three months of 2006. Aberdeen shares now stand at their highest level since the middle of 2002.

Lower down the pecking order, Trafficmaster rose 4p to 70p on the back of a bullish trading statement from the supplier of satellite navigation systems. The group said that its Teletrac unit continued to expand its geographic presence and had achieved record sales in the last quarter. Bridgewell Securities applauded the update and told its clients that Trafficmaster has plenty of scope for growth, particularly in the US.

Finally, Zoo Digital fell 9.5p to 31.5p after the computer games maker warned that its full-year results will not meet City forecasts.

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