Bayer May Buy Aventis CropScience

Reuters 30apr01

COLOGNE/FRANKFURT --- Germany's Bayer AG said on Wednesday it was considering buying Franco-German life sciences group Aventis SA's CropScience unit outright, a move which would help it catch up rivals in the field.

Bayer Chief Executive Manfred Schneider told reporters on the sidelines of a conference that he was examining a proposal from Aventis, which is seeking to spin off CropScience to concentrate on its core pharmaceuticals business.

Aventis staff-management committee sources told Reuters on Tuesday that the company had sent its CropScience sale proposal to three U.S. firms -- Monsanto, DuPont and Dow, as well as to Bayer and its arch rival BASF.

The sources said the company had decided to sell rather than float CropScience and a decision should be taken by end June.

A spokesman said Aventis was still considering a sale and an initial public offering.

Bayer and BASF had both previously expressed an interest in buying parts of the unit.

``We could also imagine taking over the whole position,'' Schneider told reporters but said no decision had been taken.

But in a potential snag to a quick deal, German drugs group Schering AG, which holds 24 percent of the division, reiterated on Wednesday it must give its blessing to any sale and was waiting for valuations in the sector to improve.

A spokesman at the company said Aventis would need its permission to go ahead with the sale.

``The current market situation is such that we would not be able to get a suitable price,'' the spokesman said, adding Schering was not against the sale in principle.

DUAL-TRACK PROCESS

Industry sources familiar with the deal said bankers were working on possible a IPO and responding to interest shown by possible trade buyers. A final decision will depend on which route offers the highest value.

The CropScience unit has been valued by Aventis at seven times core earnings before interest, tax, depreciation and amortization (EBITDA), which was 529 million euros in 2000, before exceptional items.

That would suggest a valuation of 3.7 billion euros ($3.31 billion), plus about two billion euros in debt.

Schering is seen wanting more.

``They (Schering) reckon it's worth up to 11 times EBITDA and they are not going to sell,'' said a pharmaceutical sector analyst at a major U.S. bank. The analyst described Schering's stake as ``an irritant which makes it awkward for the purchaser and...knocks the price down.''

Aventis was formed in 1999 from the merger of France's Rhone Poulenc with Germany's Hoechst.

Bayer shares were down 0.54 percent at 46.45 euros in afternoon trade on Wednesday as chemical stocks fell across the continent. Aventis shares were off 1.60 percent at 86.35 euros.

NICE BAYER FIT

But analysts were encouraged by Bayer's plans to expand.

``This would be a nice fit product-wise for the Bayer agrochemicals portfolio, so why not go for the whole thing?'' said Christian Faitz, an analyst at Julius Baer in Frankfurt.

``I think they're the only candidate seriously considering Aventis CropScience,'' he said, adding that the Aventis unit could particularly fill a Bayer blank spot in herbicides and genetically modified (GM) seeds.

Bayer is seeking approval from shareholders later this month to raise 7-8 billion euros for life sciences acquisitions.

The company, one of Europe's last chemicals-pharmaceuticals hybrids, has come under pressure to break itself up to unlock the value of its more highly rated drugs business.

CEO Schneider says this is not on the group's agenda but Bayer could seek to bolster its drugs business with a U.S. buy.

It is seen by many analysts as the main contender for the pharmaceuticals unit being spun off by DuPont. That unit is seen costing up to around $10 billion.

Bayer rival BASF bolstered its crop science business last year by acquiring American Home Products Corp.'s American Cyanamid Co. for $3.8 billion.

An AventisCropScience-Bayer link-up would give the new entity 33 percent of the European crops sciences market. With BASF it would have 38 percent and with Dow or DuPont 26 percent, said the analyst from the U.S. bank.

Bayer CEO Schneider also said on Wednesday he saw no reason to change the company's earlier outlook for 2001.

The company said in March it was expecting double-digit sales and profit growth from continuing operations this year.