ICI hits trouble over Crosfield sale
15 Jan 2000
The collapse of ICI's proposed sale of the bulk of its Crosfield subsidiary to US specialties firm WR Grace has triggered concerns over the state of the group's finances. Analysts, worried over the scale of the company's debts, have slashed their profit forecasts.
The Federal Trade Commission, the US anti-trust body, refused to grant permission for the Crosfield sale in the form the companies agreed. ICI's statement on the matter lays the blame firmly in Grace's court: `approval by the FTC could not be obtained on terms agreeable to Grace,' it says. Grace, by contrast, merely states that the agreement was terminated.
Grace agreed to buy Warrington-based Crosfield, which makes ingredients for detergents, silicas and silicates, for some £267million in April. The deal excluded the business's catalysts operations, which have been absorbed into ICI's new Synetix subsidiary. The collapse of the deal sent ICI's shares tumbling by almost 10 per cent, to 474p; as PE went to press, they stood at 504p. Their peak value, five months ago, was £12.44.
Just a week before the collapse of the Crosfield sale, ICI chief executive Charles Miller Smith was busily defending his company's radical transformation at the New York DLJ Chemical Conference. `The benefits of our portfolio reshaping are clear,' he claimed. `Our earnings are more predictable, there are exceptional growth opportunities, cyclicality is lowered and capital investment costs are reduced.'
Miller Smith claimed that the company was faced with a no-win situation. `We had to make a radical shift away from our dependence on low margin commodity operations. ICI, post the demerger of Zeneca, did not have the scale to make it alone,' he stated. `Against the recent volatility in our share price, the relative resilience of the acquired specialties businesses is shining through,' he added.
Away from the markets, there has been some good news for ICI. In a survey in the magazine Management Today, senior managers in ten of the largest firms in the chemicals sector voted ICI the most admired company in the UK chemicals sector. The survey, carried out by the Nottingham Business School, rated the companies in terms of their financial soundness, use of assets and value as a long-term investment. In last year's survey, ICI could only manage 5th place.
