IMPERIAL Chemical Industries, Britain's biggest manufacturer and the world's fourth-largest chemical firm, has begun urgently strengthening its defenses against a hostile takeover. The bid is likely to come from Lord Hanson, regarded as Britain's most successful asset-stripper, who last month acquired a small financial interest in ICI.
Financial analysts in the City of London say an attempt by the head of Hanson PLC, Britain's fifth-largest company, to capture ICI would produce a protracted, bruising battle, in which Prime Minister John Major would be under heavy pressure to intervene.
A Hanson bid, however, is likely to be ruled on not by British authorities but by the European Commission in Brussels.
If Lord Hanson succeeds in linking his Anglo-American consortium with ICI, the resulting company would be worth some 20 billion British pounds (US$34.2 billion) and hold interests in many parts of the world.
At a meeting on May 21 with ICI chairman Sir Denys Henderson, Hanson floated the prospect of a merger, but was rebuffed. Ever since, the rivals have been girding for what seems likely to be a bitter battle.
To protect his company against a Hanson takeover, Sir Denys has asked the Major government to insist that any Hanson bid be vetted by the British authorities. But City analysts say new European Community (EC) rules on company takeovers mean that the issue is more likely to be decided in Brussels, where ICI might well receive less sympathetic treatment.
First indications that Hanson had ICI in his sights came on May 14, when he purchased a 2.8 percent stake in the company for what he called "investment purposes."
Geoff Allum, analyst with County Nat West bank, says Hanson hit ICI at a difficult moment and on a tender nerve.
In the last 18 months, against a background of deepening recession, ICI profits dropped from 1.5 billion British pounds in 1989 to 977 million British pounds in 1990. Future prospects do not look much better, Mr. Allum says.
Hanson PLC, by contrast, can probably afford to bid for ICI. Its market value is put at more than 10 billion British pounds, with 7 billion British pounds in cash assets.
City of London sources say Hanson's total borrowing power could be as high as 15 billion British pounds. Any bid for ICI would likely require 12 billion British pounds.
Although on strictly arithmetical grounds Hanson appears well placed to acquire ICI, such a move would be certain to whip up a political storm.
ICI is Britain's second-largest export earner. It has 53,000 employees in Britain, and 140,000 worldwide. It is seen by politicians and businessmen as a pillar of the British industrial establishment.
The Observer newspaper on May 26 identified 57 members of the British Parliament whose constituencies represent "employment catchment areas" for ICI. Thirty of the MPs are Conservatives, with relatively slender majorities. This makes ICI's future politically sensitive, especially with a general election by mid-1992.
Hanson's reputation as an asset-stripper is heightening the atmosphere as he circles his quarry. Since 1981 he has acquired a wide range of companies, most making relatively low-tech products - bricks, cigarettes, batteries - and all ripe for rationalization. After purchasing Imperial Tobacco for 2.5 billion British pounds in 1986, he rapidly sold sections of the company, making a reported 2.3 billion British pounds.
City of London sources say ICI's board members worry that Hanson would use similar techniques against their company.
Sir Denys is being advised by the merchant bank SG Warburg. Hanson is teamed up with NM Rothshild, with support from Lazard. Each side has employed three public relations firms, which are reportedly preparing detailed analyses of ICI and Hanson PLC.
ICI is expected to focus on Lord Hanson's alleged track record as an asset-stripper. Hanson may decide to highlight ICI's financial performance and question Sir Denys's management skills.
The British government, aware that the developing struggle could damage it, at press time had made no public comment on Hanson's threatened bid. The Labour opposition has not been so reticent. Marjorie Mowlam, a Labour Party spokeswoman, said: "The government stabs British industry in the back if it simply washes its hands and lets the market decide."
A Trade and Industry Department source, however, said it was unlikely the government would intervene. The EC Commission in Brussels was empowered to scrutinize any Hanson bid.
At the weekend, there were indications that, if asked to rule on a Hanson bid for ICI, the Commission might be unlikely to stop it. A Commission source said a bid would be judged only by its likely effects on competition. The only important area of overlap in the two companies' manufactures is titanium oxide.
In the past 20 years ICI has been fined by the EC a total of 16 million British pounds for its involvement in price-fixing cartels.
The London Sunday Times reported that Lord Hanson, if he acquires ICI, plans to save 500 million British pounds a year by removing several layers of management.
Commenting on the effects of uncertainty about his company's future, Sir Denys said: "Our rivals in Frankfurt and Tokyo must be laughing their heads off. This is damaging one of the few British companies that is in the front rank of global competition."