A tale of two bosses

IT IS a tale of two bosses with dramatically different fortunes. Dr Brendan O'Neill, ICI's chief executive, has been forced to admit that he is about to launch an £800m rights issue to prevent the group's £2.9bn debt from being downgraded.

Rumours, and then confirmation, of the rescue rights call wiped half a billion pounds in a week from ICI's market value.

By contrast, Tom McKillop, who runs pharmaceuticals group AstraZeneca, saw its shares shoot up after reporting an 11% increase in profits and progress on new anti-cholesterol, lung cancer and prostate cancer drugs.

When ICI spun off its Zeneca pharmaceuticals arm in 1993, both lots of shares were valued at around £6. ICI decided to reinvent itself as a producer of fragrances and food flavours. Its shares are now 330 1/2p.

Zeneca merged with Astra of Sweden and has gone from strength to strength. Its share price is £32.50. With a market value of £53bn, it dwarfs its former parent, which is now worth £2.5bn.

Those with long memories will recall that the ICI-Zeneca split was prompted by a hostile bid from Lord Hanson that shook the former industrial icon into finding more efficient ways of delivering value to shareholders.

It has obviously worked in the case of Zeneca, but the rump of the old ICI has been far less fortunate. The strategy of moving into consumer chemicals is a sensible one, but critics say the £5bn ICI paid in 1997 to buy businesses from Unilever was far too much. It was certainly responsible for landing the company with massive debts.

The group's plans to exit bulk chemicals have also run into problems reinforcing fears that environmental liabilities may arise in future.

The US recession has made it harder to offload unwanted parts of the portfolio, notably ICI's 30% stake in Huntsman International, the sale of which has been delayed until next year.

It is hard not to sympathise with O'Neill, who doggedly believes that the City will sooner or later recognise that he is doing all the right things. The Square Mile, however, does not seem to be in any hurry. O'Neill argues that ICI is comfortably able to service its debt, with enough in the kitty to cover four years' interest.

Unfortunately, the credit climate has deteriorated since 11 September. The banks, which stand to lose heavily on Enron, Kmart and other corporate disasters, are understandably twitchy about the creditworthiness of customers.

The rights issue will probably get away - it would be a disaster if it does not - as it is likely to be priced to make the shares look attractive. But ICI's 275,000 long-suffering private shareholders will want to think hard before they put in more money.

Widows' might

THE lady on the Scottish Widows advertisements is clearly as prudent as she is alluring. Equitable Life ran into disaster by failing to put anything aside to meet its liabilities to guaranteed annuity rate (GAR) policyholders. Scottish Widows, however, salted away £1.7bn in a rainy day fund when it was taken over by Lloyds TSB two years ago.

It should therefore have no difficulty finding the £1.4bn it needs to meet its obligations to 174,000 GAR holders.

Interestingly, Charles Thomson, Equitable Life's heavily incentivised new chief executive, was previously a big cheese at Scottish Widows, a fact that may give policyholders of the troubled mutual some comfort.

Other companies also seem to have dealt with GARs more sensibly than Equitable. Friends Provident set up an emergency fund of £1bn when it floated last year, of which £500m is earmarked for guarantees. National Mutual Life increased its reserves and surrendered to a takeover by GE Capital.

There are a couple of gripes. It seems to have been an awfully long time before Scottish Widows took action, and it could have altered its bonus policy sooner - but these are relatively minor quibbles. Its sane and measured response to the GAR problem makes Equitable's recklessness all the more galling.

Allied fireworks

THE charms of a quiet life have obviously paled for Gerry Robinson. He told the world three years ago that he planned to retire to his native Dunfanaghy in Donegal to paint, sail and work wood.

Instead, he has taken over from Sir Christopher Hogg as chairman of drinks group Allied Domeq. At the helm of Granada, Robinson earned a reputation for ruthlessness culminating in his no-holds-barred takeover of Forte. Expect fireworks.