Bayer buys CropScience

October 2, 2001 Posted: 1926 GMT

LONDON (CNN) -- Germany's Bayer agreed on Tuesday to buy Aventis's agrochemicals unit for 7.25 billion ($6.6 billion), including debt.

Bayer, Europe's second largest chemicals company, has been in exclusive talks with Aventis since July to buy the CropScience business, giving it a leading position in the $33 billion-a-year agrochemical market.

"Acquiring Aventis CropScience will make us a world leader in crop science and substantially boost Bayer's earnings power," said Bayer Chief Executive Manfred Schneider.

With 4 billion sales in 2000, Aventis CropScience employs about 15,300 people in more than 120 countries worldwide. Bayer will combine the unit with its existing agrochemical business creating Bayer CropScience.

"The combined sales are expected to total between 6.5 billion and 7 billion in 2001," said the company.

Bayer (FBAY) will become the world's second-largest agrochemical company behind Switzerland's Syngenta. Aventis Crop Science is majority owned by Aventis, with a 24 percent stake belonging to German drug maker Schering .

American depositary shares for Schering (SHR: up $2.60 to $52.85, Research, Estimates) surged more than 5 percent in afternoon trading Tuesday. Aventis (AVS: up $0.07 to $0.52, Research, Estimates)  ADS's dropped marginally.

Bayer expects to take a restructuring charge of 500 million for the acquisition and estimated savings of 500 million a year. The deal is expected to result in about 4,000 job cuts or 15 percent to 18 percent of the combined CropScience and Bayer's existing crop protection business.

The purchase is not expected to boost Bayer's earnings until 2004 and will increase its debt burden to 15 billion  next year. The acquisition is expected to be completed in the first quarter of 2002, the company said.

As part of the agreement, Aventis will be responsible for any potential liabilities arising from the controversy over StarLink genetically modified corn, which had been approved for use in animal but not human feed. StarLink has been found in consumer foods.

The moves are expected to come as a relief to Bayer's investors, who have seen their holdings pounded after Bayer withdrew in August its cholesterol-lowering drug Baycol that has been linked to about 52 deaths. The buy of the Crop Science unit is expected to give Bayer critical mass in the global agrochemicals market.

Once the sale goes through, Schering expects to receive 1.5 billion from the proceeds.

"The proceeds will substantially increase Schering's financial potential for further acquisitions, co-operations and internal growth opportunities," said Schering Chief Executive Hubertus Erlen. "Schering is now a pure pharmaceutical player."

Aventis, the Franco-German drugmaker, unveiled plans last November to narrow its focus on pharmaceuticals by selling its slow-growing agricultural products unit.

Rivals of Aventis, which was formed in 1999 by the union of France's Rhone-Poulenc and Germany's Hoechst, have already separated their farm-chemicals businesses to trade as separate companies.

Anglo-Swedish AstraZeneca and Swiss drug firm Novartis floated their joint agrochemicals interests as a new company, Syngenta AG.

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