DSM will wipe €200 million off the purchase price for Roche's vitamins unit, owing to the unit's recent poor performance and costs associated with the long approval process of competition authorities.
DSM will now pay around €1,750 million for the business, made up of €1,650 million in cash and 2.24 million ordinary shares in DSM.
The companies signed a contract for the acquisition on 10 February but since then the deal has been held up by the European Commission's discussions over competitive interests in feed enzymes.
Reporting first half results today, Roche said sales at its vitamins business had dropped by 9 per cent compared with last year's second half, reaching €1020 million. The business has been affected by the weaker dollar but growth has clearly not been targeted over recent months. Sales in core pharmaceuticals rose significantly in the first half.
DSM says it can improve performance using "planned integration and transformation measures", although for the short term it will still face the same competition and price pressure concerns as other European vitamin makers. To counter the short-term costs, it has managed to gain a number of concessions from Roche.
The Dutch company said it had agreed with Roche on minimum use of certain assets and compensation for certain purchasing contracts of the vitamins division, over the three to four years when the unit is being integrated.
Roche is also to supply DSM with around €100 million in pharmaceutical ingredients sales over the next four years, according to the new agreement. In return, DSM has waived certain (unspecified) closing conditions that were part of the purchase agreement.
DSM is aiming to make €100 million in operating profit from the unit per year, (last year Roche said vitamins and fine chemicals made SF223million or €144m), with the acquisition to contribute to earnings per share from day one.
Peter Elverding, chairman of DSM's managing board of directors, said that the amended acquisition terms "form a good counterbalance for a possible continuation of adverse business developments during the coming integration and transformation period.
"I am now all the more convinced that the takeover of the Vitamins & Fine Chemicals business will give us an excellent platform for further profitable growth in nutritional ingredients," he added.
DSM, which had sales of close to €5.6 billion in 2002, will present its second-quarter results on Friday. It is expecting to finally gain control of the Roche unit in the third quarter of 2003.