Amersham merger creates world leader

Amersham International is merging with Nycomed of Norway to create the world's leading supplier of diagnostic imaging agents, which have a diverse range of medical uses from X-rays to scanners. The deal comes just three weeks after Amersham, the first company to be privatised by Margaret Thatcher in 1982, announced the merger of its life sciences division with that of Swiss drugs group, Pharmacia & Upjohn.

The new company, Nycomed Amersham, which at yesterday's share prices is valued at over pounds 2bn, will have combined sales of pounds 1.5bn and operating profits of pounds 244m, of which pounds 90m is accounted for by Amersham. The all- paper deal takes the form of an offer for Nycomed by higher rated Amersham - which will leave Amersham shareholders with 47 per cent of the combined group.

Though shares in both Amersham and Nycomed gained strongly in early trading, concerns that annual cost savings will be eroded by fierce competition in Nycomed's core US X-ray imaging market and uncertainty over renewal of two key contracts tempered Amersham's initial 255p hike. Amersham's shares closed 87.5p higher at pounds 16.82p while Nycomed's shares climbed 23 per cent to 132.5 kronas.

Bill Castell, Amersham's chief executive who becomes chief executive of the new group, said Nycomed added potentially exciting areas of MRI and Ultrasound imaging to its own world-leading position in the radioactive sector. "We now have the clout to offer radiological departments an entire range of products," he added. Trond Jacobsen, a director of Nycomed, estimated that the market for Ultrasound imaging agents could be worth pounds 1bn by 2001. "There is a wonderful base of equipment which can use our agents. Most doctors already have ultrasound machines."

The new group will have 30 per cent of the pounds 3bn world imaging market, leading Bracco (half-owned by Germany's Merck) with 21 per cent, the US's Mallinckrodt with 15 per cent and Germany's Schering with 14 per cent.

Mr Castell said that Nycomed's investments in Shanghai and Latin America positioned the enlarged company in new and fast growing markets. Merging administration, sales and marketing and the loss of around 300 jobs, including around 100 from the UK, from a combined workforce of 11,600 offered scope to save at least pounds 40m a year to 2000, with half realised by December next year. Amersham, which is changing its year end from March to December, will make a pounds 50m exceptional provision in its next nine month figures and is also paying a special dividend to Nycomed shareholders.

Analysts agreed that the deal made strategic sense and would be earnings enhancing, though numbers were complicated by the change in year end, pounds 80m cost savings from restructuring at Nycomed following last year's profits warning and the inclusion of the Pharmacia business.

Nigel Barnes, pharmaceutical analyst at Merrill Lynch, said: "This makes an enormous amount of sense given both companies are in the imaging markets. There are synergies too though not great overlap since the new group will be in four different imaging markets." James Dodwell at BZW expects the merger to add around 85p to earnings and is looking for 105p earnings and pre-tax profits of pounds 240m for the year to December 1998.

However, several analysts said privately that competition in Nycomed's mature X-ray imaging business - over 80 per cent of its pounds 154m profits last year - could erode cost savings. Following its blocked merger with generic drug group Ivax last year, Nycomed lost share to rivals who were discounting prices by up to 60 per cent.

Though Mr Jacobsen said that the discounting is levelling off, the key test will be whether, or on what terms, two of Nycomed's US contracts worth 15 per cent of Nycomed's sales are renewed.

There were also concerns that following the merger some 88 per cent of the group's profits will be earned overseas. The group, which is considering paying foreign income dividends, said that if sterling continued at current levels, pro-forma profits would be cut by pounds 30m.

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
PROMOTED VIDEO
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
Morrissey pictured in 2013
people
Sport
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices