US stalls on pounds 202m sale of Fisons arm

MAGNUS GRIMOND

Fisons' merger with rival drugs group Medeva looked set to be held up by news yesterday that US competition authorities were delaying the pounds 202m sale of the scientific instruments division.

Fisons, based in Ipswich, said the Federal Trade Commission and other US competition authorities had "expressed concern" that the sale to Thermo Instruments Systems Inc could affect competition in the markets for some of the instruments involved.

As a result, the date for completion of the sale had been extended by mutual agreement from the previously announced date of yesterday to 15 August.

Analysts believe that the proceeds from the deal would help smooth the path to a takeover of Medeva, with which talks have been under way since early April, in a deal mooted at between pounds 800m and pounds 1bn. Fisons refused to comment yesterday on the impact of the latest news on the negotiations, but it sought to play down the significance of the FTC ruling.

A representative said "a very small proportion" of the instruments business was involved in the discussions with the authorities over competition. The operations involved represented only 10 per cent of the sales of the division, which last year amounted to pounds 260m out of a total for the whole Fisons group of pounds 1.27bn. She added that such competition investigations were routine events in the US.

Analysts said the news was more of a nuisance than a disaster for the Medeva deal. Paul Diggle at Societe Generale Strauss Turnbull said: "People still expect a deal to be done and that there will have to be a cash alternative. Money in the bank will be helpful for that, but I don't think what happened today will make a transaction significantly less likely, it will just make the issues surrounding it more awkward."

Fisons had been hoping to have tied up disposals to give it net cash of close to pounds 500m by now, he suggested, but as a result of the delay it would be in "a slightly less comfortable position". Last month, Fisons sold its research and development arm to Astra of Sweden for pounds 202m and is negotiating to sell a laboratory supplies business.

Anthony Colletta, of Hoare Govett, was less sanguine, suggesting it would not help sentiment. "There is already a rumour going round the market that Fisons is ready to issue an awful lot of deeply-discounted paper to pay for Medeva. I think that would be viewed in a very bad light."

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