Swiss pharmaceuticals giant Roche has completed its previously announced exit from the vitamins business, signing a contract yesterday with Dutch speciality chemicals group DSM, the new owner of its vitamins and carotenoids unit. Roche added that it has also settled all litigation with US customers on the vitamin price fixing case.
The transaction of the vitamins, carotenoids and fine chemicals unit, resulting in a gain of €1.95 billion for Roche, is still subject to approval by the anti-trust authorities. Roche and DSM expect that the closing will take place this spring.
DSM will pay Roche €1.85 billion in cash plus 2.24 million DSM shares with a value of approximately €100 million. The difference to the transaction value indicated in September 2002 (€2.25 billion) is a result of the continued slow-down of global economies and the weakening of the US dollar against the Swiss franc, which both had a negative impact on the vitamin business performance compared to earlier forecasts, according to Roche.
This price after considering the net book value and the terms of the agreement results in an accounting impairment of operating assets of SF1.65 billion which will be recorded in the 2002 Roche group year end results.
Franz B. Humer, chairman and CEO of Roche, said: "The sale of the division and the litigation settlement bring a significant part of our history to an end."The unit pioneered the industrial synthesis of vitamin C in 1934, and since then has been a leading manufacturer of vitamins. It also produces and supplies carotenoids, citric acid and other fine chemicals for animal feed, food, pharmaceutical and cosmetics industries. Consumer brands including vitamins such as Supradyn, Berocca and Redoxon are part of Roche Consumer Health, the group's over-the-counter medicines unit and therefore not included in this transaction.
Humer added that the transfer of the vitamins business comes at a difficult time for the international economy. "This is a solid basis offering excellent prospects and continuity to the division and its employees."
The agreement will allow Roche to further focus on its core activities, pharmaceuticals and diagnostics, which had a turnover of SF19.3 billion in the first three quarters of 2002, and build on its position in healthcare.
Peter Elverding, DSM's managing board chairman, added: "The discussions with Roche over the last months have confirmed the fundamental attractiveness of these businesses, and its potential for result improvement. I am confident that this acquisition is a major reinforcement of the DSM group, and that it will be earnings-per-share enhancing right away."
In the first nine months of 2002, the Roche vitamins and fine chemicals division achieved sales of SF2,574 billion.It has however consistently failed to produce sales growth over the last year.
DSM, which supplies life science products, performance materials and industrial chemicals globally, had sales of €5.2 billion in the first nine months of 2002. It is currently aiming to grow its sales - partly through acquisitions - to around €10 billion by 2005.
The current and potential future liabilities from the vitamin price fixing case will remain with Roche. Roche says it has settled all outstanding litigation with direct US customers and most indirect US customers. The provisions for both the settled claims and the remaining open cases with US indirect customers will be increased by SF570 million to SF1.770 billion for the full year 2002. No additional provisions are expected for these US cases.