Interest in Courtaulds may spark bid battle

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The Independent Online
COURTAULDS, the chemicals company, which announced plans for a de-merger in February, could find itself the subject of a bid battle after announcing yesterday that it had received an approach that could lead to an offer for the group.

Attention immediately turned to Akzo Nobel, the Dutch paints group, as the likely bidder although analysts said the quality of Courtaulds coatings business could spark an auction. Interest could also come from ICI, Du Pont, Sherwin-Williams of the US, and PPG, another American company.

"This is the highest quality coatings business that has come on to the market in a decade. There will be lots of potential buyers," said Michael Eastwood, chemicals analyst at Dresdner Kleinwort Benson.

Courtaulds shares soared 17 per cent to 456.5p on the announcement, valuing the company at pounds 1.9bn. This followed a near 8 per cent rise on Wednesday as rumours of bid interest started to swirl around the stock market. Courtaulds shares were languishing at 252p in January but have been rising sharply since the company announced plans to spin off its coatings and sealants business. Some analysts suggested yesterday that a bidder might have to pay up to 550p per share to clinch victory.

Courtaulds' coatings business would be a valuable prize at it is the world leader in the marine and aerospace industries. Its polymers division, which makes plastic packaging for toiletries and pharmaceuticals, has been put on the market. But this could also prove attractive to Akzo Nobel. It also has a polymers division which could be merged with that of Courtaulds and then spun off. Akzo has been reducing its exposure to fibres but could absorb Courtaulds viscose and Tencel fibre operations if no buyer were found for them.

Courtaulds' coating business has sales of around pounds 1bn while polymers has sales of pounds 500m and fibres and coatings pounds 250m.

Courtaulds is one of the oldest names in British business, growing out of silk weaving in the early 19th century.

It pioneered the world's man-made fibre industry in 1904 with the development of viscose rayon, and its name became linked with acetate yarns in the 1920s and Courtelle acrylic fibre in the 1950s. It diversified into coatings a decade later.

More recently it has developed Tencel, which has been hailed as a "wonder fibre" in some quarter because it feels like silk, can absorb vibrant colours and yet is tough enough to be popped in the washing machine. However, its profits have been disappointing given the scale of investment.

In February, Courtaulds announced plans for a three-way split to sell polymers and de-merge coatings and sealants. Analysts said it was the company's last chance of hanging on to its independence.