ICI sell-off to DuPont raises $3bn

ICI yesterday sold half of its commodity chemicals business to DuPont for $3bn (pounds 1.8bn), a price far in excess of stock market expectations. Shares in the chemical group jumped 9 per cent to 886p.

Analysts were also surprised at the speed of the sale. Including DuPont, ICI has raised pounds 2.9bn from disposals in just two months since it acquired Unilever's speciality chemicals business for pounds 5bn. In May, ICI said it would raise pounds 3bn from disposals over the next three years to reduce debt following the acquisition.

Analysts said disposing of the remaining industrial chemicals assets could realise at least another pounds 1bn, taking total disposal proceeds to over pounds 4bn.

Charles Miller Smith, ICI's chief executive, said the disposals together with the Unilever deal "confirms the decisive shift in ICI" from a commodity chemicals group into one of the world's leading speciality chemicals companies.

"We now have a portfolio of world-class businesses across our three key areas of coatings, speciality chemicals and materials, which offer wonderful growth prospects, give us much more predictable future earnings and are significantly less capital intensive. We have virtually reached this target [pounds 3bn] less than three months after it was set," he said.

One analyst said: "It's a wonderful deal. To have achieved this in such a short space of time is unprecedented. I don't think the scale of the achievement has dawned on us yet."

The disposal announcement yesterday came less than a week after ICI said it would reap pounds 1bn from the sale of its stake in ICI Australia and made property disposals worth around pounds 120m.

Mr Miller Smith said there would be further sell-offs over the next 12 months: "More has to be done to ensure a fundamentally different ICI."

The disposals to DuPont comprise ICI's polyester polymer and intermediates business, its titanium dioxide operations outside North America and its polyester film business. Collectively, those businesses had sales of pounds 1.5bn. Another pounds 2bn of sales will disappear from the group when it sells quarrying chemicals and the remaining Tioxide operations as well as explosives.

ICI said that DuPont had declined to buy North American Tioxide because of monopoly issues, but had agreed to cover the deficit if ICI received less than $150m.

Allan Spall, ICI's finance director, said that reducing exposure to bulk chemicals, which will represent just over a fifth of sales compared with 37 per cent last year, would reduce the impact of the strong pound on profits. ICI, which exports around a quarter of its sales, has been severely squeezed by high manufacturing costs in the UK and low selling prices abroad.

Mr Spall, who estimates a pounds 90m hit from sterling when interim results are reported later this month, said: "At the lighter end of chemicals, manufacturing tends to occur close to customers. We can buy and sell in the same currency." The proceeds should reduce borrowings from around pounds 6bn, cutting gearing by around 20 percentage points to "less than 100 per cent", said Mr Spall and will be earnings enhancing by 1998.

Analysts said the disposal price of 1.4 times 1996 sales was "very full". However Peter Cartwright at Williams de Broe said strategy was more important for DuPont, which will almost double its share of the world market in titanium dioxide, a white pigment used in paints, to over 40 per cent.

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