Grow sets rival suitors three-day bid deadline

ICI has three days to decide whether to increase its bid for Grow Group, the American paint manufacturer it is trying to take over for $290m (pounds 180m).

Grow, which is also being courted by Sherwin Williams, ICI's arch rival in the US, has given its two suitors until this Sunday afternoon to come up with final offers.

It said it had instituted a formal bidding process in light of the competing offers, adding that it expected any bid to be all- cash and accompanied by an executed merger agreement. It will issue the form of the agreement later today.

ICI announced a recommended bid for Grow two weeks ago, priced at $18.10 a share, only to have it trumped by Sherwin Williams, which offered $19.50 a share, or $320m.

An ICI spokesman said yesterday: "We have no further comment to make at this stage." Industry sources, however, expect the company to come back with a higher offer.

The battle for Grow took an aggressive turn when Sherwin Williams accompanied its bid with a handful of legal writs designed to overcome any special deal it feared that ICI might have set up to protect its offer.

The impending court wrangle underlined the intense competition between the two companies.

Glidden, an ICI subsidiary, is headquartered just a few blocks away from Sherwin in Cleveland. The two have been bitter rivals for many years.

Last year the commercial battle between the two intensified after Sherwin lost its account with Home Depot, the US DIY chain, to Glidden.

Rivalry apart, there are sound commercial reasons for both companies to want to buy Grow.

The US paint industry, faced with soaring costs of phasing out environmentally unfriendly solvent-based paints, is increasingly looking to acquisitions to provide earnings growth.

The need to replace solvent-based paints with water-based products has come at a bad time for the industry, already struggling to cope with wafer- thin margins as raw material costs rise.

Companies have been unable to increase prices to compensate for higher input costs because of oversupply and the nature of the paint market, where maintaining market share depends on competitive pricing.

The US accounts for a third of the pounds 35bn world paint market and ICI sees it as key to its global ambitions.

Even if ICI comes back with a higher offer this weekend, winning Grow could well be decided by the companies' lawyers.