Zeneca puts pounds 2bn price tag on chemicals arm

Francesco Guerrera
Sunday 23 October 2011 07:09

ZENECA, THE drug giant, yesterday put its specialty chemicals business up for sale with a price tag of up to pounds 2bn in a bid to focus on its pharmaceuticals and agrochemicals businesses.

The company said that it planned to sell Zeneca Specialties, which produces dyes for computer printers, colours, leather finishes and chemicals for drugs, to a single buyer by the first quarter of next year. Sir David Barnes said the rapid consolidation in the chemicals industry offered "the best long-term future for the business, its employees, customers and shareholders". Zeneca said it had received no offers for the business but industry analysts predicted that the announcement will trigger a bidding war among the world's largest chemicals groups. Bidders are likely to include Du Pont and Dow of the US, Laporte of the UK and the Swiss giant Clariant, formed earlier this week through an $8bn merger between Clariant and Ciba Specialty Chemicals.

The City welcomed Zeneca's decision to exit the highly-cyclical chemicals business to focus on its core drug and agrochemicals units. Shares in Zeneca, which have suffered because of the chemicals operation, soared 28p to 2,283p after the news of the proposal.

Industry experts said the divestment increased the chances of a sale of the agrichemicals business as Zeneca strives to improve the performance of its core drug-making business. The specialty chemicals division had sales of pounds 885m last year, a fraction of Zeneca's pounds 5.2bn turnover. Zeneca is set to retain Marlow Foods and two factories in Huddersfield and Grangemouth in Scotland.

Zeneca Specialties's performance has improved steadily since Zeneca's demerger from Imperial Chemical Industries in 1993, with margins rising from six to 10 per cent over the past four years.

Martin Evans, the head of research at stockbroker Sutherlands, said the division "is much better than it was. It has reasonably good margins and a very good market position. This is a good deal for Zeneca and a good deal for the industry".

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