London Briefing:The £7.2 billion (€10.66 billion) bid for ICI from Akzo Nobel has put yet another piece of Britain's industrial heritage on the auction block.

Of all the great names that have fallen prey to overseas bidders in recent years - P&O, Pilkington, Corus (British Steel) and MG Rover, to name just a few - ICI perhaps carries the most emotional resonance.

In its day, Imperial Chemical Industries, as it was then known, was a powerhouse of British manufacturing. Founded in 1926 through the merger of four British chemical companies, ICI sold £27 million worth of products in its first year of business, and made a pre-tax profit of £4.5 million.

From the instantly recognisable Dulux dog, first used to advertise its paints business in 1963, to its wavy line logo, ICI came to represent all that was best in British manufacturing. At its peak, the company employed more than 130,000.

ICI scientists have been behind numerous breakthroughs over the decades, including the creation of polythene; the first effective treatment for malaria; and the development of beta-blockers.

It was known as "the company that changed people's lives" and the brightest and best science graduates joined the firm from university, expecting to spend their careers there.

In 1984, under the leadership of Sir John Harvey-Jones, who later starred in the Troubleshooter television series, ICI became the first British business to make profits of £1 billion.

The 1990s brought tougher times, not least of which was an abortive takeover move by Hanson (which last month itself came under foreign ownership).

The furore that greeted Hanson's attempt on ICI severely tarnished the acquisitive conglomerate's reputation. But, for ICI, it also sparked a series of disposals, including the demerger of its pharmaceuticals side, Zeneca (now part of AstraZeneca), that have left the company a shadow of its former self.

So the City of London is not getting too misty-eyed at the prospect of ICI losing its independence to an overseas bidder. In any case, Akzo Nobel's heritage is every bit as great as ICI's and stretches back even further. The Dutch company also has a history of acquisitions in Britain, having bought Dulux rival Crown Berger in 1990 and acquiring another famous British industrial name - Courtaulds - in 1998.

Having seen ICI shares slump to just 100p four years ago, shareholders also do not appear too unhappy at the Akzo move, which has sent ICI's shares soaring to an eight-year peak.

Although the Dutch company's initial 600p a share offer has been roundly rejected, it is widely expected to come back with a sweetener, taking the terms to nearer 700p a share. If not, then there are a number of rival bidders waiting in the wings.

These are thought to include the American chemicals giants Dow Chemical and Du Pont, as well as BASF of Germany and India's Reliance Industries.

Although it is no longer the bellwether of British industry it once was, ICI is an attractive target. It has a commanding 40 per cent share of the British paint industry and has built up a thriving business in the fast-expanding Asian markets, as well as in America, its biggest single market.

Last year, half its near-£5 billion annual turnover came from paints, with its share of the worldwide paint and coatings market estimated to be almost 8 per cent.

Analysts agree that the two companies are an extremely good fit, although there are likely to be competition concerns in Britain, where the combined market share of Dulux and Crown would be more than 50 per cent. But analysts believe Akzo would have little hesitation selling off the Crown business in order to satisfy the competition authorities.

Assuming the Dutch company raises its terms to the satisfaction of ICI shareholders, there is one final hurdle it will have to overcome - the ICI pension deficit. Reflecting eight decades as one Britain's biggest employers, the main ICI British pension fund has liabilities of more than £9 billion.

Of its 70,000 members, just 800 are "active"; the rest are pensioners with an average age of 74. The remainder of its 3,400 UK workforce either joined after 2000, when the fund was closed to new members, or joined ICI via its acquisition of businesses from Unilever, and remain part of the Unilever fund.

The ICI trustees have already made clear that they intend to play a central role in any sale of the business. And they are a force to be reckoned with. They have the power to determine the size of the fund's deficit, which could be anything from £500 million to more than £2.2 billion, depending on assumptions about longevity, market movements and the financial strength of the buyer.

Akzo is sitting on a substantial cash pile after the sale of its pharmaceuticals business earlier this year and has a higher credit rating than its target, and thus should have little difficulty demonstrating its financial strength to the trustees. But not all bidders are in that position - notably the ubiquitous private equity players.

This may be one prize that the increasingly beleaguered private equity boys will not even bother to chase.

Fiona Walsh writes for the Guardian newspaper in London