Second approach may start Courtaulds bidding war

COURTAULDS, the coatings and fibres group which last month agreed a pounds 1.8bn offer from the Dutch chemicals group Akzo Nobel, revealed yesterday it had received a second bid approach which analysts said could lead to a bidding war for the company.

The second bidder is widely thought to be either PPG Industries or Sherwin Williams, two US paint groups which were both thought to be looking at Courtaulds before it agreed the 450p per share offer from Akzo Nobel.

Courtaulds, one of Britain's oldest companies, revealed the second approach in its recommended offer document by Akzo Nobel which it posted yesterday. However, Courtaulds said no offer had been received and it was not possible to determine whether a firm offer would be forthcoming. It said it still considered the Akzo Nobel offer fair and reasonable and that its board was unanimously recommending it.

Sherwin is the market leader in the American paints industry and has been expanding into South America. PPG has also been expanding and last year bought some Italian and German automotive coatings businesses. Analysts said other bidders could include ICI, which has been completing a radical overhaul of its chemicals operations. However, it is understood that ICI management is cool on the idea of entering the fray at current prices. Courtaulds shares rose 25p to 464p valuing Courtaulds at pounds 1.9bn.

Martin Evans at Sutherlands, the stockbrokers, repeated his statement that Courtaulds was "seriously under-valued" at 450p per share given its rarity value and its prime market positions in sectors such as the marine, aerospace and protective coatings industries as well as its polymers business. "You won't be able to build market positions like these. You would need to buy them," he said. He put a possible take-out price of 600p per share on the company.

Akzo said it has "sufficient financing available" should the need arise to re-think its position.

Analysts believe any interloper would have trouble dislodging Akzo unless it had a very well defined plan for the Courtaulds fibres business.

Akzo wants to spin off the operation along with its own fibres business. "You can see how it works for Akzo. It's a bit harder to see how it works for one of the big paint companies," said Peter Cartwright at Williams de Broe.