Amersham to control APB

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The Independent Online
Amersham and Pharmacia & Upjohn, the US-Swiss group, yesterday announced the full terms of the merger of their life sciences divisions into the world's biggest biotechnology supply business and have agreed to prepare the joint venture for flotation by 2000. The new business, called Amersham Pharmacia Biotech, will have annual sales of pounds 430m, 3,600 staff world-wide and combined research spending of around pounds 40m a year.

News of the deal was welcomed by investors, driving Amersham's shares up by 131.5p to an all-time high of pounds 14.82. The closing price values Amersham at pounds 874m.

Fears that the UK group would not win control of the new company proved groundless. Amersham will own 55 per cent and retains full control of the company's board, with Bill Castell, chief executive, appointed as APB's chairman, and Ron Long, managing director of Amersham Life Sciences, becoming chief executive of the new group. As well as the flotation, Amersham has the option to buy out the remaining stake in the company.

Mr Castell said the deal gave the group critical mass in high- growth markets such as genomics and gene sequencing. He expected to save around pounds 30m in the deal's third year from a 10 per cent cut in the workforce and reduction in operating costs at Pharmacia. He said the deal would be earnings-enhancing in its first year.

Analysts were divided about whether the deal would immediately enhance earnings, but said the strategy was right and the scope for cost savings was substantial. Nigel Barnes at Merrill Lynch said the savings would come through the job cuts and improvement in operating margins at Pharmacia, which spends around 57 per cent of its revenues on administration compared to 42 per cent at Amersham.

"This deal makes a great deal of strategic sense and it should be earnings enhancing. The Pharmacia business has 9 per cent margins compared to 24 per cent at Amersham. There is plenty more fat to go from Pharmacia," he said.

The details came as Amersham announced pre-tax profits up 30 per cent to pounds 66m in the year to the end of March. The increase reflected a sharp rise in healthcare profits as the sale of prostrate cancer products soared. The dividend total is 22p, up 22 per cent.

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