Go-ahead for pounds 20bn drugs merger

THE CHEMICALS giants Rhone-Poulenc and Hoechst will today formally announce plans to create a pounds 20bn Franco-German pharmaceutical and agrichemicals group based in the historic town of Strasbourg, which has been fought over by the French and Germans for centuries.

The combined company, which is to be called Avantis, will be the largest life sciences group in the world by sales, overtaking Merck, the American drugs giant, and Glaxo-Wellcome of the UK.

The group will also be the largest agrichemicals group, ahead of Norvatis, the Swiss giant.

In structuring the deal, the Germans appear to have bent over backwards not to offend the French. Not only will the company be headquartered in France, but the French have won the battle to ensure that it is Jean-Rene Fourtou, the Rhone-Poulenc chairman and chief executive, who will head the all-powerful management board. Jurgen Dormann, the Hoechst chief executive whom the Germans had wanted to run the combined operation, will run the supervisory board.

Moreover, the new company is to be split 50:50 between Hoechst and Rhone- Poulenc, despite the fact that on current market valuations the split would work out closer to 60:40 in the Germans' favour.

Unions have already expressed concern at the level of job cuts likely to flow from the deal. The talk is that 10 per cent, or 15,000 jobs, could go.

The two companies intend to keep their separate share listings until 2001 to allow them to divest operations that do not form part of the merger plan. Hoechst announced last month it was planning to spin off industrial chemicals.