Acquisitions and agreements

BBI Newsletter, The, March, 1996

The March 7 announcement of the plan to merge the two companies into a new firm known as Novartis took industry watchers by surprise, but was seen as an opportunity to dramatically cut costs (some 14,000 jobs from a combined work force of about 135,000 are expected to be lost over a three-year period), while at the same time providing a huge infusion of research and development funds.

Ciba-Geigy and Sandoz, both based in Basel near Switzerland's border to France and Germany, had combined 1995 sales of about $30 billion. The new company will have a market capitalization in excess of $62 billion. Novartis would hold about 4.4% of the global pharmaceutical market, behind only Glaxo Wellcome (London), itself the product of a mega-merger last year, which holds a market share of almost 6%.

The new company will spin off Ciba-Geigy's specialty chemicals division, and Sandoz's construction chemicals operations will either be spun off into a separate company or sold. After those divestments, 59% of Novartis' business will be in health care therapeutics and products, 27% in agribusiness and 14% in nutrition.

* The previously announced acquisition of Cordis Corp. (Miami Lakes, Florida) by Johnson & Johnson (New Brunswick, New Jersey) was completed in late February, following approval by Cordis shareholders. Under the deal, which had a value of about $1.8 billion, Cordis and Johnson & Johnson Interventional Systems have combined under the Cordis name.

For more news of acquisitions and agreements, see Table 11 and Table 12.

Singapore firm acquires Dornier stake

The sale of a majority stake in Dornier Medizintechnik (DMT; Germering, Germany), the medical technology subsidiary of Deutsche Aerospace (DASA; Friedrichshafen, Germany) to Singapore Technology and Industry Group (STIG, Singapore) occurred in early March, after earlier being blocked by Dornier family interests. About 20% of Dornier Medizintechnik's shares will remain in the hands of the Dornier GmbH parent company.

Daimler Benz (Stuttgart, Germany) the parent company of DASA, will this year announce a loss of $4 billion, the worst ordinary loss in German corporate history. Within the last few months, Daimler Benz has broken up its loss-making industrial group AEG industrial group, pulled out of Fokker, the Dutch regional airplane maker, and initiated more job cuts at DASA. German sources said closing the deal was delayed by the Dornier family, which stated a preference for a "German solution." They wanted a sale to Siemens, but that approach and an earlier interest expressed by Jenoptik, a subsidiary of Carl Zeiss Jena (Jena, Germany), met with no success.

With sales of about $167 million, Dornier Medizintechnik has three main divisions: lithotripsy, ultrasound and laser surgery. The lithotripter line was developed in cooperation with medical specialists at the Grosshadern Medical Center (Munich). Dornier's ultrasound line stems from the company's 89% interest in Acoustic Imaging Technologies (Phoenix, Arizona). Although the ultrasound systems are designed by Acoustic Imaging for the U.S. market, units destined for European and Asian markets have system adjustments carried out by the Warnking Medizintechnik subsidiary (Solingen, Germany).

In addition to its headquarters in Germering and the Acoustic Imaging Technology subsidiary in Phoenix, there also are Dornier sales operations located in Kennesaw, Georgia; Toronto, Canada; and Tokyo.

Dialysis clinic battle continues

The battle for W.R. Grace & Co.'s (Boca Raton, Florida) National Medical Care (NMC; Rockleigh, New Jersey) unit took another twist in early March with the revelation that Hercules Inc. had made a merger bid for Grace. Though the offer was declined, speculation flared that Hercules might follow it up with a unsolicited acquisition effort.

That, in turn, fueled speculation that the planned acquisition of NMC by Fresenius (Oberursel, Germany), already in progress, may not be a done deal. Some analysts speculated that Baxter International's (Deerfield, Illinois) previously rejected bid for NMC might be revived.

The Baxter International offer, valued at $3.8 billion, was for an outright acquisition, whereas the Fresenius deal, which would merge NMC and Fresenius kidney dialysis treatment centers worldwide, would create a new company, Fresenius Medical Care, in which W.R. Grace shareholders would hold 44.8% In addition, NMC would pay Grace $2.3 billion, which it would use to buy back up to 20% of its own equity. According to Grace, the spinoff would be tax-free to shareholders.

Fresenius had a 20% world share of the dialysis product market in 1994, up from 14% in 1987, with 1994 sales of $1.34 billion. In its drive for expansion, Fresenius has over the past four years acquired kidney dialysis companies in France, Italy, Spain, Netherlands, Turkey and the U.S., as well as setting up joint ventures in India and China. Fresenius is targeting an eventual global market share of 30% and the NMC project would be a giant step in that direction. NMC has 624 dialysis centers, mainly in the United States, with more than 45,000 patients. That network gives NMC market leadership, with about 25% of the U.S. market.