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Bayer Agrees to Acquire CropScience For $4.9 Billion
Plans 4,000 Job Cuts
 Wall Street Journal 2oct01

FRANKFURT -- Bayer AG Tuesday said it agreed to acquire Aventis SA's CropScience business for 5.35 billion euros ($4.9 billion), plus the assumption of 1.9 billion euros of debt, and will cut thousands of jobs at the agrochemical company to lower costs.

Bayer said it will increase its borrowing to pay for the acquisition from Aventis of France and Schering AG of Germany.

The purchase will bring some 500 million euros a year in cost savings from combining overlapping research and other operations and cutting some 4,000 jobs, the company said.

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

Bayer, a 138-year-old company, is going through a rough spot. In August, it withdrew its prime anticholesterol drug -- Baycol -- world-wide after it was linked to more than 50 deaths. Bayer warned that the loss of Baycol, its No. 3-selling drug, would cut 2001 earnings by some 800 million euros.

The withdrawal of Baycol, marketed as Lipobay in many countries, raised speculation that Bayer might sell its drug business to focus on polymers, agricultural products and industrial chemicals -- a move Mr. Schneider has resisted.

Mr. Schneider said Tuesday that Bayer will retain its pharmaceuticals business, which has "enormous potential."

Bayer Is Near Deal for About $4.9 Billion To Acquire Aventis's CropScience Unit

For Aventis, which owns 76% of CropScience, the sale is another step in its planned refocusing on its core pharmaceuticals business. It has said it expects to gain some 5.5 billion euros from the deal.

Still, all liability connected with Aventis's genetically modified corn StarLink will remain with Aventis. Last year, the corn found its way into food products such as taco shells even though it wasn't approved for human consumption.

Shares in Bayer were down 1.6% at 30 euros in afternoon trading in Frankfurt. Schering, which holds the remaining 24% of CropScience, gained 3.5% to 56.41 euros. Aventis slipped 0.2% to 81.70 euros in Paris.

Bayer forecasts sales of eight billion euros by 2005 for the CropScience business, Mr. Schneider said. Bayer said it expects approval for the acquisition by the end of the first quarter of 2002.

Bayer also said Tuesday that it will retain its four-pillar strategy, comprised of Health-Care, Polymers, Chemicals and Agriculture, into which Aventis CropScience will be integrated.

According to Bayer Chief Financial Officer Werner Wenning, the transaction will be financed by expanding the company's existing commercial-paper and European medium-term notes programs. As a result of the volume of new borrowings, Bayer now expects a downgrade in its credit ratings, but still expects an "A" rating after the transaction, it said.

In 2002, the company said its net indebtedness will initially rise to 15 billion euros. The reduced borrowing power will prevent Bayer from making further acquisitions on this scale in the next two to three years, the company said.

The acquisition ends more than two months of exclusive talks to buy the unit after Bayer edged out rivals BASF AG and Dow Chemical Co. of the U.S. in July. With the business, Bayer would move up the ranking from the world's fifth-largest agrochemical concern to rival Anglo-Swiss competitor Syngenta AG, the biggest.

Aventis's divestiture of its agriculture business is the latest in a string of similar moves by major drug firms, in the U.S. and Europe, to jettison their nonpharmaceutical operations and focus on the more-profitable prescription-drugs business. Last year, American Home Products Corp. sold its American Cyanamid Co. crop-science business to BASF for $3.8 billion, and Pharmacia Corp. spun off part of Monsanto Co. Novartis AG and AstraZeneca PLC also dropped their farm-chemical divisions to create Syngenta.

The sale of CropScience is the last major step in Aventis Chief Executive Juergen Dormann's efforts to transform the French-German firm into a pure pharmaceuticals competitor.

Bayer Is Near Deal for About $4.9 Billion To Acquire Aventis's CropScience Unit
Vanessa Fuhrmans / Wall Street Journal 2oct01

Bayer AG could announce as early as Tuesday that it has clinched a deal to acquire Aventis SA's CropScience business for close to 5.3 billion euros ($4.9 billion).

Negotiators were still hammering out the last details to a final agreement late Monday and people close to the talks say the deal could still be delayed another day or two. But anticipating that a transaction could be signed in time, Bayer scheduled a news conference for Tuesday morning.

The imminent acquisition, which includes additional debt of roughly two billion euros, ends more than two months of exclusive talks to buy the unit after Bayer edged out rivals BASF AG and Dow Chemical Co. of the U.S. in July. With the business, Bayer would move up the ranking from the world's fifth-largest agrochemical concern to rival Anglo-Swiss competitor Syngenta AG, the biggest.

Aventis's divestiture of its agriculture business is the latest in a string of similar moves by major drug firms, in the U.S. and Europe, to jettison their nonpharmaceutical operations and focus on the more-profitable prescription-drugs business.

Last year, American Home Products Corp. sold its American Cyanamid Co. crop-science business to BASF for $3.8 billion, and Pharmacia Corp. spun off part of its Monsanto Co. Novartis AG and AstraZeneca PLC also dropped their farm-chemical divisions to create Syngenta.

For Bayer, the Aventis crop-science deal is another sign it plans to forge ahead as a chemicals and drugs conglomerate despite investor pressure to break itself up. Last month, the German concern said it would keep its drugs business after all, although it previously had announced it might give up control of the division in the wake of the withdrawal of Baycol, one of its best-selling drugs.

People close to the talks say Bayer won't take on liabilities associated with lawsuits linked to CropScience's genetically modified corn StarLink, which found its way into food products such as taco shells last year even though it isn't approved for human consumption.

Once the deal is signed, though, it must still be cleared by antitrust authorities. Analysts have speculated that Bayer may be forced to sell the company's line of insecticide products to gain regulatory approval.

Bayer is under pressure to build up its crop-protection business, especially after the creation of Syngenta and BASF's acquisition of American Cyanamid. While Bayer remains one of the world's biggest producers of fungicides, it is only a small player in herbicides, with about 3% of the world market.

The sale of CropScience is the last major step in Aventis Chief Executive Juergen Dormann's efforts to transform the French-German firm into a pure pharmaceuticals competitor. The deal would include the sale of Schering AG's 24% stake in the business.

Bayer Won't Divest Pharma, Has "Enormous Potential"
Dow Jones Newswires 2oct01

LEVERKUSEN, Germany -- Bayer AG (G.BAY) forecasts sales of EUR8 billion by 2005 for its CropScience agrochemical business, the company's chairman Manfred Schneider said at a press conference.

Bayer called the press conference late Monday following the completion of talks to acquire Aventis CropScience, in which Aventis SA (F.AVE) owned a 76% stake and Schering AG (G.SCH) owned a 24% stake.

Bayer said it expects approval for the acquisition by the end of the first quarter of 2002.

Schneider also said Bayer will retain its pharmaceuticals business, which has "enormous potential."

The company said in August that it was considering its pharma strategy following the withdrawal of its Baycol cholesterol-lowering treatment.

Bayer also said it would retain its four-pillar strategy, comprised of Health Care, Polymers, Chemicals and Agriculture, into which Aventis CropScience will be integrated.

According to Bayer Chief Financial Officer Werner Wenning, the EUR7.25 billion transaction will be financed by expanding the company's existing commercial paper and European Medium Term Notes, or EMTN, programs.

As a result of the volume of new borrowings, Bayer now expects a lowering in its credit ratings, but still expects a good "A" rating after the transaction, it said.

In 2002, the company said its net indebtedness will initially rise to EUR15 billion. The reduced borrowing power will prevent Bayer from making further acquisitions on this scale in the next two to three years, the company said.

Bayer said funds for debt repayment will be released by improving working capital management. The company said it hopes to mobilize EUR2.5 billion by reducing working capital.

02/10/01 - 10-44G

The purchase of Aventis CropScience will result in the loss of 4,000 further jobs, Schneider said.

Schneider said the figure was approximate and was based on the experience of previous acquisitions.

This figure is in addition to the 4,000 job losses that were announced as a result of restructuring earlier this year, and the 1,250 job losses in connection with the Lipobay/ Baycol withdrawal, Schneider said.

With regard to the company's pharmaceuticals division, Bayer said it would now be divided into two areas, biotechnology and ethical pharmaceuticals.

02/10/01-  11-27G

By combining the two companies agrochemicals activities, Bayer said it expects to achieve a synergy potential of EUR500 million per year, which will be realized in full from 2005.

The takeover will start to make a positive contribution in earnings from 2004, Bayer said, with one-off restructuring costs of EUR500 million spread over the next three years.

According to Jochen Wulff, the general manager of Bayer's Crop Protection Business Group, Bayer will benefit, in particular, from Aventis Cropscience's herbicides business, which is a current area of weakness at Bayer.

Aventis CropScience has an "interesting development pipeline" of new products, Wulff said.

Addressing Bayer's weakness in herbicides, which are used on cereals, corn, cotton and soybeans, will strengthen Bayer's position in the North American Free Trade Association countries and in Latin America, Wulff said.

With the takeover, Bayer will rank third in the global herbicides market behind Monsanto and Syngenta, Wulff said, adding that herbicides is the biggest segment of global crop protection business.

Bayer's current strength is in its "outstanding portfolio" of insecticidal and fungicidal products, Wulff said.

In insecticides, Bayer's position will be further strengthened by Aventis CropScience's fipronil and deltamethrin products, Wulff said. In fungicides, Bayer will benefit from Aventis CropScience's Rovral and Aliette products, Wulff said.

The acquisition will also give Bayer access to the area of biotechnology for commercial exploitation and seed know-how, Wulff said, adding that the seeds market is important in offering additional market potential for products that were initially developed for crop protection.

After the takeover of Aventis CropScience, Bayer will be positioned among the three top companies globally in the market segments of crop protection, seeds and green biotechnology, Wulff said, adding that the combined business will put Bayer just behind world leader Syngenta.

Company Web site: http://www.bayer.com

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