Mumbai: ICI India is planning to demerge its paints and specialty chemicals businesses following Azko Nobel''s agreement to acquire its parent company, UK bellwether Imperial Chemical Industries Plc (ICI), for £8 billion ($16 billion).

Dutch coatings and chemicals maker Azko Nobel NV has an agreement with German consumer group Henkel KGaA to sell ICI''s adhesives and electronic material businesses for £2.7 billion ($5.5 billion).

The deal values ICI shares at 670 pence, which is a 22 per cent premium to ICI shares the day before the target confirmed talks with Akzo

ICI India''s paints business, with revenues of Rs900 crore, will go to Azko Nobel, while its Rs100 crore adhesives and electronic material division will go to Henkel. The transaction is expected to be completed by the end of the year.

Henkel, the maker of Loctite glue, said it would buy adhesives and electronic materials businesses, known as `National Starch'', from the US unit of ICI.

The acquisition is conditional on the completion of ICI takeover by Akzo Nobel NV, the Dusseldorf, Germany-based company said in a statement.

Arnhem, Netherlands-based Akzo Nobel clinched the deal after twice improving its offer and winning an extension from competition regulators. Akzo said it would pay 670 pence per share to acquire ICI before selling `National Starch'' to Henkel.

"The preagreed on-sale of ICI''s adhesives and electronic materials businesses to Henkel is entirely consistent with our promise of financial discipline and provides the added benefit of being able to return additional cash to our shareholders in the near future," Akzo Nobel chief executive Hans Wijers said in a statement.

While Akzo''s two initial offers were rejected by the ICI board, UK''s Takeover Panel also last month told Akzo to either submit a formal offer by August 9 or walk away.

Akzo, which makes Sikkens and Sadolin paints, had recently sold its Organon Biosciences NV unit to Schering-Plough Corp. for $14.4 billion.

In addition to the acquisition of ICI, cash-rich Akzo said it would extend a €1.6 billion ($2.2 billion) share buyback by €3 billion.

Akzo said the integration of ICI''s paint business would yield £280 million in synergies. The acquisition would also make Akzo Nobel the world''s largest coatings maker.

A UBS team led by Robin Budenberg, which also tapped Matthew Greenberg at Merrill Lynch & Co, is advising ICI. Mark Rawlinson and colleagues at Freshfields Bruckhaus Deringer are ICI''s legal advisers.

Akzo Nobel chief executive said he was confident of convincing shareholders to accept the company''s £8-billion takeover of ICI despite opposition from a number of institutional investors who believe the deal is too expensive.

TPG-Axon, the US fund which owns about 3.5 per cent of Akzo Nobel, and the Dutch broker Rabo Securities are both opposed to the deal.

Wijers also admitted the takeover would lead to job losses in both businesses, and said that £213m had been earmarked for expenses such as redundancy payments. "We don''t start by thinking that if there are redundancies then they are ICI redundancies, but from the position of employing the best person for the job," Wijers said.

Akzo expects annual cost synergies of £190m from the deal.

Imperial Chemical Industries was formed in 1926 by the merger of four chemical companies and was a pioneer in the plastics industry. It is the latest in a long line of British companies to fall into foreign hands in recent years, including P&O, BAA, Abbey, Corus, Pilkington and BOC.