Markets live chat transcript for the chat ending at 11:36 on 22 Nov 2006. Participants in this chat were: Neil Hume (NH) Paul Murphy (PM)
PM: Welcome to Markets Live – Alphaville’s daily markets discussion.
PM: Right we’ve had a few tech probs this morning — sorry about that.
PM: Let’s get straight into the main feature — ICI
PM: a story of restructuring – remaking an iconic name of british manufacturing.
NH: and getting TOTALLY WRONG.
PM: And then remaking the business once again
NH: which were are currently in the throes of and we have news this morning that ICI’s Quest flavours and fragrance business is being sold to the Swiss for $2.25bn.
PM: How’s gone down generally?
NH: v well.
PM: Share price?
NH: up 8.7% to 420.5p.
PM: So, this leaves the old ICI concentrating on paints and adhesives, yes?
NH: it does they will account for around 80% of ICI’s revenues going forward by my reckoning.
PM: Now Quest was part of the supposedly transformation set of acquisitions ICI made in the late 90s, no?
NH: it was. just being looking back through the FT archive.
PM: Ok a trip down memory lane …
NH: ICI PAYS £4.9BN FOR UNILEVER ARM – CHAIRMAN HAILS COMPANY’S ‘COMPLETE TRANSFORMATION’.
By Jenny Luesby.
457 words
8 May 1997
Financial Times
1
English
(c) 1997 The Financial Times Limited. All rights reserved
Imperial Chemical Industries is to buy Unilever’s speciality chemicals division for #4.9bn and sell #3bn of its own industrial chemicals businesses.
The deal also represents a strategic shift for Unilever, which will emerge with a #3bn cash pile to enable it to accelerate its drive into developing markets.
It plans acquisitions in its foods and personal products businesses that will lift the share of its sales in developing markets from 30% to 50% within a decade.
PM: Hmm – complete transformation, not!
NH: it was so transformational that the company required an emergency tranfusion of £800m in 2002.
PM: Just three years after the deal — which was buying from Unilver
NH: shall we take another trip down memory lane??
PM: Oh, go on
NH: FRONT PAGE – COMPANIES & MARKETS – ICI to launch #800m rights issue.
By DAVID FIRN.
548 words
1 February 2002
Financial Times
English
(c) 2002 The Financial Times Limited. All rights reserved
FRONT PAGE – COMPANIES & MARKETS – ICI to launch #800m rights issue – Chemicals group moves to cut #2.9bn debt after credit rating threatened.
Imperial Chemical Industries, the heavily indebted chemicals company, is planning one of the UK’s largest rights issues after credit rating agencies threatened to downgrade its paper to junk bond status.
The UK’s largest chemicals group will on Monday launch a deeply discounted #800m rights issue to reduce its #2.9bn debt. The issue, fully underwritten by UBS Warburg, is the fourth largest in the UK since 1998.
NH: Analysts said it was likely to be the first of many as indebted industrial groups sought to restructure their balance sheets.
ICI’s decision deeply to discount and fully underwrite the issue raised eyebrows in the City. One analyst said US shareholders, who hold 30 per cent of ICI, were lukewarm.
A person familiar with the rights issue said it was important with such a large issue to give certainty of funds as quickly as possible. Banking sources said the capital expansion would cost less than #20m in fees.
Brendan O’Neill, ICI chief executive, said the capital expansion had been forced on the company but it would be less painful than the rise in interest rates that a downgrade would trigger. “We thought this was a better long-term outcome for shareholders.”
The interest rate on the group’s short-term debt, amounting to about #1bn, could rise by about four percentage points if it were to lose its BBB/Baa2 credit rating. This would reduce earnings by 10 per cent.
PM: Still, that’s enough history. What are people saying specifically about the Quest sale today?
NH: well the traders I have been talking to this morning reckons ICI is now a sitting duck.
PM: Yes, a notice that people are talking about its clean balance sheet
PM: This deal wipes out its debt
NH: at precisely the same time as PR groups are looking to buy and gear-up businesses.
PM: Got any analyst comment to hand?
NH: i have.
NH: JP Morgan Neil Tyler
Specialty Chemicals
Neil C TylerAC
(44-20) 7325-9935
neil.c.tyler@jpmorgan.com
• Quest sold for £1.2bn. ICI has this morning announced that it has
signed an agreement with Givaudan to sell it Quest Flavours and
Fragrances business for gross cash consideration of £1.2bn. The
disposal price amounts to around 2x our 2007e sales estimate and
15.2x EBITDA (2007e).
NH: Disposal should add around 25p per share to our valuation. In
our peer group (trading) sum of the parts analysis, we had included
a value of £900m for Quest. We wrote at the time of the Q3 results
that we considered a price of £1.1bn to be at the top end of the
likely range. ICI expects the deal to close in Q1 2007.
NH: hang on got another note from UBS.
NH: The market is likely to see the disposal positively, as another step in
management’s transformation of ICI. However, we would like to highlight that a
lot of the blue sky on strategy has now been achieved (only remaining disposal is
in R&I) is now replaced with acquisition risk, although management’s track record
has been good.
PM: And i’ve got some stuff from Peter Cartwright at Evolution ..
PM: he’s sauying the sale removes many of the constraints on ICI. Moving to a Buy — initial price target of 470p
PM: Ok let’s have a quick look at the markets
PM: Neil.?
NH: Despite several heavyweight stocks including HSBC and Vodafone trading ev-dividend, FTSE 100 up around 20 points at 6,222.5, lifted by a strong performance from Asian markets overnight.
PM: : Details please.
NH: OK. In Tokyo, Nikkei finally rallies, closing around 1.3 per cent higher – the first time in six sessions that it has closed in the black
NH: By all accounts the rally was driven by bargain hunting
PM: And in Hong Kong?
NH: Hang Seng up 1.3 per cent to a record high as investors piled into China plays. The likes of China Mobile and PetroChina were all well bid.
PM: I see the miners are on the charge again this morning. What’s driving it metal prices?
NH: Yep. Copper price ended at a 8-day high overnight in New York. Seems like short sellers were trying to buy back positions ahead of tomorrow’s Thanksgiving Holiday in the US.
NH: However, platinum, Tuesday’s star performer, is under a bit of pressure. Price had fallen around 6% this morning on profit taking.
PM: OK. The crude price?
NH: A touch weaker this morning. Not much happening there.
PM: What about sterling?
NH: The pound has eased against the dollar this morning. That followed the minutes of the latest Bank of England monetary policy committee meeting.
PM: And that showed????
NH: That two members had voted against this month’s interest rate hike.
NH: Expectations had been for just one dissenter. So perhaps interest rates have peaked after all.
PM: Right, let’s have a look at DSG — the old Dixons — figures out this morning
NH: and they have not impressed.
NH: shares down 4.9% at 207.75p – biggest FTSE 100 faller.
PM: Top of the down leage
PM: This was a pre-close trading update ahead of Xmas, yes?
NH: it was. analysts are calling it a Bad Italian Job.
PM: Oh yeah? — go on
NH: The shock is that the UniEuro business in Italy has
worsened dramatically (-10% LFL) and, with lower gross margins, hascaused so much damage to H1 profits that overall group H1 PBT will be
only flat (against expected c20% growth).
PM: That comes from Nick Bubb at Evos.
NH: it does he is the DSG guru.
PM: Well has been one of the top retailing watchers for as long as i can remember
PM: What has he done to his forecasts?
NH: hang on, i’ll paste.
NH: On the back of
the Italian setback, market profit forecasts are coming back by
GBP10-15m for the full-year and we are cutting our GBP340m PBT forecast
(y/e April 2006) by GBP12m to GBP328m (12.3p).
PM: How about lower down the corporate ladder? Whats going on today
NH: Seen this thing Fishworks this morning?
PM: Ah, Fish restaurants. I’ve been there. Rubbish. Over the top prices for standard fare. Don’t even think about it.
NH: No, not that company.
PM: Yeh, I know. Tony Allan, professional sarf Londoner. Thing went bust about four years ago, but Allan somehow managed to resurrect it. He didn’t control the business when it went under, but tnvestors were burned but he managed to stage a come back
NH: No, no no. This is a fishmonger – shops NOT the restaurants.
PM: Oh, well I still wouldn’t recommend Fish! Just my view
PM: But go on, what’s happened here?
NH: Well actually, Fishworks does have restaurants – but typically with fish cooking schools and also fishmongers. It had a concession in Harvey Nicks in Knightsbridge, but that didn’t work out and it closed down.
PM: And?
NH: Well its come out with a trading statement this morning. Profits are going to be well below expectations – struggled with its expansion plan – now got 12 units, but trading has been below forecasts.
NH: Management are promising to concentrate better on what they’ve got. But the shares have tanked — off 13.5p at 35p. This is a former Ofex stock that was assumed to be doing quite well
PM: Fish cookery, eh. That Fat Duck guy, Heston Bloominhardtofollow was on the box last night, supposedly doing the crispiest ever fish batter.
NH: Yeah?
PM: Well he had some trip to a science lab in Leeds, tried all sorts of batters and then came up with the ultimate – wait for it ….
PM: Flour etc, a bottle of larger – a JUG of VODKA (?!?!) …
NH: Eh?
PM: And then you put the whole concoction in a soda stream bottle and put it in the fridge
NH: ???????
PM: It’s about the bubbles, you know. Lots of bubbles in the batter creates tiny thin layers of batter that the brain registers as crunchy. That’s why beer works well – and Heston has added the sofa fountain carbonator to make it even crispier
NH: But what about the vodka – not many bubbles in that.
PM: No your right. Not sure about that.,
NH: Sounds a complete palaver. I am more of a Gordon Ramsey man myself. Anyway, can we get back to the market – the stock market, rather than Billingsgate.
PM: Sure
NH: Paragon, the buy to let mortgage lender, has taken a real pasting this morning.
PM: i saw that — shares off 4.6 per cent — 31p — at 645p.
PM: Interim figures, no? But were they really that bad?
NH: not it is the gudiance that had upset investors.
NH: pbt for 2006 expected to be at the lower end of expectations.
PM: Any more detail — I was just looking at a note from katrina Preston at Bridgewell and she seemed rather upbeat
NH: hang on a minute it is Paragon, a rival to Kensignton that issued the bearish guidance.
PM: Okay, why are Kensington’s shares down more?
NH: let’s ask Ms Preston to supply the answer.
PM: She doesnt really answer that.
NH: let’s blame it on the Paragon guidance.
PM: Right, we’ve got to wrap up now. Bit all over the shop today. Apologies. We’ll get our act back together for tomorrow at 11am. So do join Markets Live on Thursday.
NH: Er, bye