Swiss create chemical solution despite wars, cartels and spillages

There is more than a touch of deja vu about the proposed marriage between Sandoz and Ciba-Geigy. The companies have long and similar histories and worked extremely closely together for the first half of this century, writes John Shepherd.

Ciba-Geigy started life in 1758 when Johann Geigy started selling spices and natural dyes. The Ciba part of the business was not really formed until almost a century later when Alexander Clavel started to take advantage of the development of synthetic dyes.

By 1900, Ciba, an acronym for Gesellschaft fur Chemische Industrie im Basle, had become Switzerland's leading chemical company and benefited greatly for a few years from the collapse of the huge German chemical cartel during the First World War. However, the German cartel was reassembled as IG Farben soon after the war and the Swiss had little option but to form their own cartel called Basel AG, comprising Ciba, Geigy, and Sandoz.

The Swiss companies, which shared profits, technology and markets, quickly started to do much better than the German cartel and diversified into pharmaceuticals and other chemicals.

In 1929, the German and Swiss cartels merged and a couple of years later the French and British equivalents were brought into the fold. The so- called Quadrapartite Cartel lasted until the outbreak of the Second World War, leaving only the cosy Swiss grouping intact.

The Swiss also made a big breakthrough during the first year of the Second World War when Paul Muller, a scientist at Geigy, invented DDT - a compound which won him a Nobel prize.

The cartel lasted until 1951 when the three Swiss companies decided that they no longer needed the protective cartel umbrella and went their separate ways.

Ciba and Geigy continued to diversify. During the 1950s Geigy expanded rapidly, finding new markets in agricultural chemicals. By the late 1960s its sales were greater than Ciba's.

Fresh and intense competition from foreign companies such as Imperial Chemical Industries brought Ciba and Geigy back together again. Ciba and Geigy merged in 1970 and expanded rapidly through acquisitions in the US, including Airwick Industries and Funk Seeds.

The acquisitive policy continued in the 1980s, and Ciba-Geigy also began forming joint ventures. One of the most notable was the link-up in 1986 with Chiron to produce and market genetically engineered vaccines. It bought Maag AG, the agrochemicals business, from Hoffmann-La Roche in 1990. Following the break-up of the Swiss cartel, Sandoz was busily diversifying. It moved into the seeds business, buying Minneapolis-based Northrup, King & Company and the Dutch-based Zaadunie.

During the 1980s it bought Wasa, a Swedish crispbread company, and the Master Builders construction chemicals business from Martin Marietta.

All the success, however, was marred in the company's centenary year in 1986 when a warehouse fire spilled tons of chemicals into the Rhine, killing fish and contaminating water as far away as the North Sea.

The 1990s has again been a period of diversification, involving buying investments in two American biotechnology companies - Genetic Therapy and SyStemix.

Today, some 45 per cent of sales come from pharmaceuticals, 18 per cent from nutrition products, 14 per cent from chemicals and the rest from agroproducts, seeds, and construction and environmental chemicals.

Additional reporting by Bloomberg