updated 8/13/2007 11:05:27 AM ET 2007-08-13T15:05:27

Imperial Chemical Industries PLC, the British company that makes Dulux paints, said Monday it accepted a $16 billion takeover offer from Dutch company Akzo Nobel NV.

ICI had rejected earlier offers from the chemicals and industrial coatings maker. The 8 billion pound bid, worth 670 pence ($13.54) a share, must still be approved by shareholders of both companies.

ICI shares rose 1.8 percent to 636 pence ($12.79) on a sharply higher London Stock Exchange, still below the bid price on speculation that Akzo investors will reject the deal as overpriced. Akzo shares were up 1.4 percent at 57.45 euros ($78.70) on a broadly higher Dutch market.

Akzo Chief Executive Hans Wijers said that he will be talking to Akzo Nobel investors in coming days to convince them of the deal's merits.

Akzo, whose brands include Crown Paints, wants to add ICI's paint business to its own and plans to sell ICI's adhesives and electronic materials businesses for 2.7 billion pounds ($5.4 billion), once the ICI deal closes.

German chemical company Henkel KGaA said earlier Monday it had signed an exclusive agreement with Akzo Nobel to buy the two ICI units.

ICI Chief Executive John McAdam said Akzo had made a "compelling offer which delivers full value for ICI reflecting ICI's strong future growth prospects and strategic opportunities."

Wijers said the deal would create a global coatings and specialty chemicals company with access to fast-growing markets in Asia and Latin America.

Rabo Securities said that while the takeover makes sense from a strategic point of view, the financial terms are not good for Akzo Nobel shareholders. It advised shareholders in the Dutch company to vote against the plan, adding that it can create significantly more value at lower risk if it does not acquire ICI.

Wijers said there would be job cuts from combining the two companies, primarily in overhead, administration and in sales, but did not provide figures.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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