Akzo to paint Asia mart via ICI takeover

The acquisition of ICI by Akzo Nobel, which began to look likely today with the Dutch giant raising its bid to $16 billion and winning access to the UK company's books, will help Akzo regain leadership in the paints business.

Akzo Nobel's leadership was challenged briefly, after the Pittsburgh (US)-based PPG Industries Inc made an offer to acquire Dutch coatings company Sigma Kolon for $3.04 billion on July 19.

"Akzo is perceived to be strong in industrial coatings (which brings majority of its revenues), while ICI is seen strong in decorative paints. Now, Akzo will be a company that is strong in both. They will be able to leverage much better," said a senior executive with a paint major in India.

Akzo will also gain from ICI's strong presence in fast-growing markets in Asia, where demand for paints is growing at 12-15 per cent and where Akzo has insignificant presence. In many of these markets ICI has been growing at a scorching pace.

Last year, ICI grew business in India, China and Sri Lanka at 20 per cent, Pakistan at 40 per cent and Vietnam at 50 per cent.

By virtue of its acquisition of ICI, Akzo will be the fourth largest player in paints in India, after Asian Paints (29 per cent market share), Berger and Nerolac (14 per cent each). ICI has a market share of about 10 per cent.

ICI executives were not available for comment. Akzo Nobel has a powder coatings business in India under Akzo (in July 1998, it had acquired Courtaulds which had operations in India) and also forayed into decorative paints. Akzo could merge its operations with ICI India. "Akzo will have to also decide what brands they would like to promote in India. They may drop some competing brands in decoratives and leverage synergies with ICI," said a paints analyst with an FII broking house.

"ICI is a listed company, one doesn't know if Akzo Nobel would let it remain listed," he added. Akzo Nobel's powder coating business in India is estimated at Rs 100 crore.