ICI Australia Recommends $360M Buyback

30th May, 1997

Background

On 7 May 1997, Imperial Chemical Industries PLC ("ICI PLC") announced that agreement had been reached to acquire the speciality chemicals businesses of Unilever. At the same time, ICI PLC stated that it intended to increase its existing divestment programme to include the sale of its 62.4% shareholding in ICI Australia Limited ("ICI Australia"). ICI PLC indicated that it intended to sell, subject to market conditions, its shareholding by way of a public equity offering to institutional and retail investors in Australian and international equity markets ("the Global Offering").

ICI Australia now wish to advise of two significant developments.

Proposed selective buyback

At the time of the announcements, ICI Australia announced that it would assist ICI PLC in the sell down process to facilitate the orderly sale of shares. As part of this process, ICI Australia agreed to evaluate a selective buyback of shares in ICI Australia from ICI PLC, in conjunction with the Global Offering.

After careful consideration, the Directors of ICI Australia have agreed to recommend to shareholders that ICI Australia undertake a selective buyback of shares from ICI PLC for up to $360 million at a price per share equal to the institutional offer price achieved under the Global Offering less a discount of 1.5% (subject to a maximum price of $11.96 per share).

The Directors believe that the benefits to non associated shareholders of the buy-back include an increase in earnings and cash flow per share, the favourable buyback pricing mechanism and the resultant increase in the underlying value of the remaining ICI Australia shares.

The Directors' recommendation is supported by the independent expert, Grant Samuel & Associates, which has concluded that the proposed buyback is fair and reasonable to the shareholders in ICI Australia not associated with ICI PLC.

An Extraordinary General Meeting of ICI Australia shareholders will be held on Wednesday 25 June 1997 to consider, and vote on, the proposed buy-back. ICI PLC and its associates are not permitted to vote on the resolution. The meeting booklet containing the Notice of Extraordinary General Meeting, Explanatory Memorandum and the Independent Expert's Report will be despatched to shareholders shortly.

Future commercial relationship with ICI PLC

Since ICI PLC's announcement on 7 May 1997 of its intention to dispose of its shareholding in ICI Australia, detailed discussions have taken place between the respective management teams of the two companies in respect of the nature of the relationship that will exist between ICI PLC and ICI Australia after ICI PLC shareholding falls below 50%.

The agreements between ICI Australia and ICI PLC which will be entered into, will relate among other things, to intellectual property, technology, supply and distribution arrangements.

The Directors believe that, with the exception of some one-off separation costs, these arrangements, will be neutral to positive for ICI Australia. The company will make a further announcement on these arrangements as soon as the relevant agreements have been executed.