Company of the week: AstraZeneca

ASTRAZENECA, the drug company, agreed to sell its speciality-chemicals division to Cinven Group and Investcorp, both private equity investors, for $2.1bn (pounds 1.3bn) in cash, quitting a business it put up for sale last year to focus on drugs.

AstraZeneca, the maker of the anti-ulcer drug Losec and Zestril for hypertension, said it will book an after-tax profit of $150m on the sale.

London-based Cinven and Luxembourg-registered Investcorp said they will sell high-yield bonds to refinance the loans after the purchase closes in June. They added that they plan undisclosed acquisitions to expand the business. AstraZeneca, formed last month when the Zeneca Group bought Sweden's Astra for $40bn, will use the cash to finance growth in the consolidating $300bn drug industry.

"Their balance sheet was looking a bit naked," said Joe Anderson, an analyst with Dresdner Kleinwort Benson. "It desperately needs cash to pay for restructuring and this will give them options to expand their development pipeline."

AstraZeneca faces the patent expirations of three of its top-selling drugs within three years. They are the anti-ulcer drug Losec, the world's best-selling medicine, Zestril, the No2 "ACE inhibitor" hypertension drug, and Nolvadex, a breast-cancer treatment. Analysts say it needs to buy and develop new products to fill gap left by the expected drop in those drugs' sales.

AstraZeneca's specialty-chemicals division, which makes pigments for paints, biocides and other chemicals, generated 1998 sales of $1.1bn, had a net asset value of $765m and operating profit of $150m.

Richard Warner, a member of Investcorp's management committee, said the fund has no immediate plan to sell any of the six constituents of AstraZeneca.

AstraZeneca said it was "well positioned to take advantage of opportunities in its faster-growing pharmaceutical and agrochemical businesses."