The transformation of Imperial Chemical Industries is almost complete after two months of wholesale business swapping.
Last week it announced the sale of half of its bulk chemicals businesses – polyester polymers, Melinex polyester film and its titanium dioxide operations (excluding the US business) – to DuPont for £1.8bn.
This good price, according to the City, goes some way to raising the £3bn target the company set out in May when it agreed to pay £4.9bn for Unilever’s speciality chemicals business. With the £1bn from the sale of its 62.4% interest in ICI Australia, it has now raised some £2.9bn.
The bulk chemicals business has been ravaged by the sector’s cyclical nature and exports have been hit by the high value of sterling. ICI has opted to abandon this roller-coaster for the more stable high-margin niche speciality business.
Sir Charles Miller Smith, ICI chief executive, described the DuPont deal as `another major milestone in creating a new ICI for the new century. The portfolio of businesses in ICI is well positioned to develop and deliver sustainable profitable growth over the coming years.’
However, businesses left to dispose of include the US part of the Tioxide operation, worth about £100m, and probably its ethylene, chlorine, chemical quarrying and explosives and fertiliser operations.
ICI’s trading figures out today are expected to show 1997 first-half profits of £160m before exceptionals. This will include a £90m hit from sterling – underlining the company’s reasons for withdrawing from bulk chemicals.
The DuPont deal is also good news for ICI: by reducing ICI’s debt it frees it to spend more time on building new business rather than disposing of old. It will buy up smaller, speciality competitors in markets where there is room for consolidation.
The T&G union, representing the 2,600 UK employees who will be transferred to DuPont, fears big job losses and cites broken promises by the US giant.
DuPont, which bought ICI’s nylon business in 1993, is accused of breaking an undertaking of no job losses with an announcement of 860 sackings within two months of the acquisition. DuPont denies there was an undertaking and ICI says it might have been forced to make the same decision if it had retained the business.
DuPont thinks it can make money out of bulk chemicals. It is the world’s biggest titanium dioxide manufacturer, with an estimated 22% of the market; with the addition of ICI’s business, this will rise to 35%.
It is buying ICI’s titanium tioxide capacity of 535,000 tonnes a year, produced by 6,400 employees at sites in the UK, France, Spain, Italy Malaysia and South Africa. In 1996 these plants recorded a trading loss of £12m, on sales of £533m.
ICI may have been transformed almost overnight, but its UK bulk chemical operations will have to wait to see what their fate is under their new US bosses.