MARKET REPORT: ICI strikes a chord in American investors' portfolios

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The Independent Online
The Americans have fallen in love with Imperial Chemical Industries. Although profits are being buffeted by the relentless strength of sterling and forecasts reduced, the shares are displaying remarkable resilience.

US investors seem to have latched on to ICI following its pounds 4.9bn acquisition of Unilever's speciality chemicals division. Then the shares were around 700p. They rose 20p to 823.5p, within hailing distance of their 12 month peak.

The imperious advance is in stark contrast to the performance of many of Britain's industrial powers.

They have been weighed down by the pound's profits-sapping strength; the trend to higher interest rates and, after last week's Budget, the threat of increased pension contributions. ICI has ignored such developments.

Yet, as if to underline the damage sterling is doing to its profits, NatWest Securities has slashed its estimates. It has moved from pounds 490m to pounds 430m and from pounds 700m to pounds 610m. Last year's figure was pounds 498m.

It appears the new look-ICI, with its determination to raise pounds 3bn from disposals in the next three years to cut debt, has touched a US investment chord.

The group has already made a start through the proposed sale of its 62 per cent stake in its Australian off-shoot which could produce pounds 1bn.

The Unilever deal is seen as the first strategic move to reinforce ICI following the demerger of the Zeneca drugs group four years ago. Since then ICI shares have been completely overshadowed by the rip-roaring Zeneca performance.

US influences also spurred Cadbury Schweppes. The soft drinks and sweets group was at one time up 25p with American investors keen to stockpile.

But Cadbury, which closed up 17p at 563.5p, is never far from the takeover mill. Unilever, following its chemicals deal with ICI, has cash to spare and could feel Cadbury, valued at pounds 5.5bn, would represent a useful add- on to its branded operations.

The American interest in Cadbury is, on trading considerations, surprising. For the British group, it would appear, is having a bruising time in the American soft drink market.

British Aerospace was another to climb on bid hopes, up 32.5p to 1,345p. General Electric Co, the market's favoured suitor, should offer year's figures today and, perhaps, a few clues about its plans.

The rest of the stock market was pulled out of deep lethargy by New York. At one time Footsie was down 36.4. With the Dow Jones Average in uncharted territory during London hours it ended with a mere 2.1 fall at 4,810.7.

Woolwich maintained the building society habit of exceeding expectations with the shares hitting 373.5p; they closed, with Seaq putting turnover at 24.6 million, at 334p.

Tomkins, following figures, was the best performing blue chip, up 14.5p to 278.5p. Dixons, with year's results due tomorrow, put on 20p to 495.5p. Henderson Crosthwaite believe the shares were oversold with windfall gains now making a positive contribution to electrical sales.

BT, after Friday's excitement, fell 10p to 491.5p. Yamaichi, the Japanese securities house, say the Budget's corporation tax cut will boost net profits by some pounds 70m this year and next - "more than compensating for the impact on the windfall tax on earnings".

Sterling's impact was still evident. One casualty was Eurotherm, the electronic equipment group, down 20p to 320p, a three-year low. Packaging group Low & Bonar, blaming sterling for most of its profit fall, weakened 19p to 262.5p.

BSkyB retreated another 4.5p to 439.5p, reflecting Rupert Murdoch's remarkable comment that the shares were overvalued and a lowered 425p target from Lehman Brothers.

Soccer Investments, the cash shell set up as a vehicle for a football club, rose 6p to 107.5p as it looked as though it had found a club - Leicester City.

Bridon, the engineer, jumped 34p to 171.5p as FKI produced a 175p cash bid, pricing the group at pounds 131m.

Premier Farnell, the electronic group, fell 6.5p to 455p on a rumoured Dresdner Kleinwort Benson downgrade and Redland, the building materials group, tumbled 15.5p to 301p on HSBC caution. HSBC also damaged Abbey National, off 11.5p to 876.5p, by moving its stance from buy to hold.

Thistle Hotels continued to soften on a reported Merrill Lynch downgrading, falling 4.5p to 144.5p after touching 140.5p.

Colleagues, the junk mail group, posted an 11.5p gain to 80p; it confirmed an outside buyer was in talks to bid.