March 2004 Aventis Retains Rhodia Shares; Sanofi Proceeds with Hostile Takeover Attempt Aventis will not be required to reduce its 15.3 percent stake in Rhodia down to less than 5 percent because the sale of these shares could destabilize Rhodia's restructuring efforts. The sale was originally a requirement of the 1998 merger between Hoecsht and Rhone-Polenc to create Aventis. The latest agreement approved by the European Commission does require Aventis to sell its 49 percent stake in Wacker-Chemie within several years. Separately, in defense of Sanofi-Synthelabo's hostile $6.1 billion (Euro 4.8 billion) take-over bid, Aventis announced plans to buy back $2.5 billion to $3.7 billion (Euro 2-3 billion) of its own shares. Aventis will also spin off its pharma products business into an independent company valued at Euro 1.5 billion, retaining a 49 percent stake in the new orgnaization. The Blackstone Group and other private equity firms are considering the purchase of the remainder of the new company. Total and L'Oreal, the two companies that together have a controlling stake in Sanofi, have given their support to the hostile takeover bid for Aventis. Both companies signed a memorandum to relinquish their rights under a former agreement to block or amend the Sanofi bid for Aventis because of the likely dilution in their holdings. Sanofi has received approval from the French stock market authority AMF for the takeover. Aventis' supervisory board unanimously rejected the takeover bid as "clearly inadequate" when it was formally launched by Sanofi. The board also indicated that the offer had other social risks associated with it and recommended that shareholders reject it. Aventis has lodged two appeals against the approval of the takeover bid by French stock market regulator Autorite des Marches Financiers (AMF), claiming that Sanofi's supplementary note contains insufficient data, particularly in reference to Sanofi's heart drug Plavix. The AMF agreed to delay the closing of Sanofi's offer, which was expected to be set by Paris Court of Appeals judge Christine Penichon on March 1st.   Famous Quotes of the Month - Failure seldom stops you; what stops you is the fear of failure. (Jack Lemmon) - Every great mistake has a halfway moment, a split second when it can be recalled and remedied. (Pearl S. Buck) - What you can do is often simply a matter of what you will do. (Norton Juster) - It's not what you are, it's what you don't become that hurts. (Oscar Levant) - Never regret. If it's good, it's wonderful. If it's bad, it's experience. (Victoria Holt) How Did They Keep Beer Cold in the Saloons of the Old West? Even though beer drinkers of the 19th century didn't drink beer as cold as they do now, they still preferred their brew cool (we should note that in some countries such as England and China, they often imbibe on pints of warm ale). In colder areas of the American West, saloons used to gather ice from frozen lakes in the winter. The beer harvest was stored in ice houses where the blocks of ice were insulated with sawdust. This method would keep the ice for months. Where it wasn't cold enough for ice to form, many saloons still had access to cool mountain streams. Saloon workers would fill a cistern with this stream water to store and cool barrels of beer. If no cold mountain stream was available, saloons built a root cellar to house beer. These were usually built into the side of a hill and could keep beer below 50 degrees Fahrenheit (10 degrees Celsius). Asbestos Claims Largely Settled by Eastman With an agreement to resolve more than 90 percent of asbestos claims originating in Mississippi, Eastman Chemical has settled over 80 percent of its outstanding asbestos claims. Over 11,000 claims had been filed against the company. Eastman says the latest settlement will not impact the company financially. BASF to Buy Back Stock BASF will buy back up to $640 million (Euro 500 million) worth of its stock in 2004 in order to reduce its equity ratio and increase earnings per share. The company also repurchased Euro 500 million worth of its shares in 2002 and 2003. In 2001, the stock buy back totaled Euro 1.3 billion. Celanese Gets New Chairman; Management Supports Blackstone Bid Vice chairman and COO David Weidman will become chairman of Celanese effective November 1, following the retirement of Cluadio Sonder. CFO Perry Premdas will also leave as of October 31, and a replacement for him is being sought. The management of Celanese has also announced its formal support for the $3.94 billion (Euro 3.10 billion) friendly takeover offer made by the Blackstone Group. The offer of Euro 32.50 per share is a 13 percent premium over the three-month weighted average share price before the offer was made. At least 85 percent of outstanding shares must accept the bid by March 15th. As the largest shareholder with 26.28 percent, Kuwait Petroleum has already agreed to the offer. Celanese's works council, which represents employees, pensioners and senior management that own about 6 percent of the stock, also supports the deal. Ciba Will Concentrate Capacity Expansions in Asia Ciba Specialty Chemicals does not plan to build any new plants in Europe or the U.S. Rather it will make all new facility investments in Asia, with China being the most likely location. In the U.S. and Europe, efforts will be targeted at modernizing and improving the productivity and efficiency of existing plants. Of the $190 million (Euro 160 million, CHF 250 million) budgeted for annual capital expenditures over the next three years, Ciba will spend about 60 percent on maintaining or improving environmental health and safety, increasing output at existing facilities, and further automation. The other 40 percent is targeted for new product lines in its home and personal care, plastic additives and coating effects businesses. Clariant Announces Further Job Cuts In order to improve the efficiency of its organizational structure and business processes, Clariant will cut an additional 4000 jobs, or about 15 percent of its workforce, over the next two years. Most jobs will be in general administration, infrastructure, production and the supply chain. Various functions previously distributed throughout the world will be concentrated at Clariant's Muttenz, Switzerland headquarters. Clariant already sold its cellulose ethers business at the end of 2003 and is in negotiations for the sale of its electronic materials business. DSM to Make Further Job Cuts Following a recent announcement to reduce the workforce in its nutritional products unit by 420 jobs, DSM said it will cut another 500 positions, or nearly 21 percent, in the support services and manufacturing staff departments at its facility in Chemelot, Netherlands. The company will begin implementing the cuts in the second quarter of this year and will complete them over a two year period. A charge of Euro 33 million will be taken in DSM's fourth quarter results to cover the costs of the cuts, and the company expects to gain annual savings of at least $64 million (Euro 50 million). The reductions are part of a reorganization designed to address the diverse and fragmented nature of the support services and manufacturing staff at the facility. Total Reorganizes Chemicals Business Total's chlorochemicals, intermediates and performance products will be spun off as an independent company. The 2003 sales for these three activities totaled $6.4 billion (Euro 5 billion). The petrochemicals and specialties businesses will remain wholly owned by Total. The demerger will take place once the unit is "financially strong enough," according to a company spokesperson. In addition, 132 jobs will be cut. Total's chemicals businesses experienced a 28 percent drop in operating profits and an 11 percent decrease in sales. VWR International Acquired by Private Equity Firm Merck KGaA sold VWR International, its U.S. laboratory distribution business, to private equity firm Clayton, Dubilier & Rice. The deal, valued at $1.68 billion (Euro 1.31 billion), is subject to regulatory approval. Effective April 1, Merck will form a new life science & analytics division comprised of its current analytics & reagents and life science products divisions. VWR will continue to distribute Merck's products. The sale will allow Merck to focus on its core businesses and significantly reduce its debt. Akzo Gets New Chemicals Head Leif Darner, currently general manager of Akzo Nobel's marine and protective business, has been appointed as a board member for chemicals, effective July 1. Darner replaces the retiring Dag Stroemqvist, who has been a board member since 2000. Lubrizol Gets New CEO Lubrizol appointed James Hambrick, currently company president, as chief executive officer. Hambrick replaces the retiring William Bares effective April 26, 2004. Bares will remain chairman through the end of the year. Hambrick has worked for Lubrizol since 1978. Pannonplast Gets New Head Hungary's Pannonplast has appointed board member Csaba Zoltᮠto replace chief executive officer and chairman Jᮯs Ill鳹 effective immediately. Ill鳹 was dismissed for poor performance, particularly related to his failure to complete a reorganization that was expected to reduce operating costs, manage the company's investment portfolio and optimize the tax obligations of Pannonplast. Currently the company is expecting higher than anticipated losses for 2003. 4th Quarter Performance Mixed in Europe Akzo Nobel, BOC and Henkel reported profits greater than those expected by analysts. Ciba Specialty Chemicals' performance was less than expected, posting lower sales and earnings. ICI also reported a decline in sales and earnings, while Shell Chemicals experienced a loss for this period. Akzo has received early bids for two of the businesses it put up for sale in 2003. ICI is considering the sale of some of its businesses as a result of its performance. All companies expect 2004 to be another difficult year. Currency Devaluation in Venezuela A 17% devaluation of Venezuela's Bolivar from Bs1600/dollar to Bs1920/dollar will negatively impact the petrochemicals industry in the country, according to the Venezuelan Chemicals and Petrochemicals Association (Asoquim). The association now expects flat growth in 2004 for Venezuelan petrochemicals, instead of a continuation of the 15 percent growth experienced in 2003. Most petrochemical companies were prepared for the devaluation because the government's budget proposals had indicated that it was considering taking this action. Free Trade on Chemicals Continues Between EU and Mexico A free trade agreement between the European Union (EU) and Mexico that covers 55 chemicals will be extended for an additional three years. Duty free status for Mexican imports will be maintained, and Mexico will phase out its duties on EU imports in an accelerated time period. The value of the trade for these chemicals, which include Citric acid and Methyl salicylate, totaled $130 million (Euro 102 million) in 2002. Mergers and Acquisitions Expected to Increase Public auctions for the assets of companies like Rhodia, Akzo Nobel, Eastman, Rutgers and Dynamit Nobel are contributing to a rise in merger and acquisition activity in 2004. This increase follows a strong fourth quarter in 2003. Overall M&A activity was very high in 2003, with $21 billion in mergers and acquisitions completed. Of these transactions, 67 were valued at over $25 million. Large deals (over $1 billion) are also on the rise. Examples include the merger of IMC Global with Cargill's fertilizer business, Air Liquide's purchase of Messer Group's gases business for $2.68 billion, the Blackstone Group's plans to take over Celanese for $3.1 billion, and the $4.2 billion acquisition of Nalco by a consortium consisting of Blackstone, Apollo Management and Goldman Sachs Capital Partners. Financial buyers are more active in chemical industry M&A now and are particularly interested in mega deals where they have the cash to make the investments. Danisco to Acquire Rhodia's Food Ingredients Business Danisco will negotiate for the takeover of Rhodia's food ingredients business and plans to sign an agreement in the near future, with the deal expected to close in the second quarter of 2004. The purchase will include Rhodia's cultures, hydrocolloids and food safety products, but will exclude food phosphates, which is up for sale separately. Sales for the food ingredients business reached Euro 211 million (DK1.6 billion) in 2003. Diosynth to Lose 350 Jobs in Restructuring Diosynth, the chemical synthesis business of Akzo Nobel, will cut 350 jobs and close manufacturing facilities in Mexico. Jobs will be lost in Mexico (175), Netherlands (100) and Scotland (75). Overcapacity in the custom synthesis market is the main reason for the reorganization. The site closure in Mexico and all other job reductions, will take place by the end of 2004. Dow Finalizes Celanese Acrylates Deal Dow Chemical completed its acquisition of Celanese's acrylates business for an undisclosed sum. With the purchase Dow gains a production facility in Clear Lake, Texas plus the acrylates product line including inventory, intellectual property and technology for crude Acrylic acid, Glacial acrylic acid, Ethyl acrylate, Butyl acrylate, Methyl acrylate and 2-Ethylhexyl acrylate. Celanese will continue to provide some contract manufacturing services to Dow, and Dow will supply Celanese with some acrylates products. Spolchemie Up for Bids The 65.7 percent stake that the Czech government has in Spolchemie, a manufacturer of inorganic chemicals, organic dyestuffs, and resins, is up for bid. Bids must be placed by February 27th. The state owns 53.7 percent of the company directly, and an additional 12 percent through the National Property Fund. FDA Approves Boehringer's Spiriva The U.S. FDA approved Boehringer Ingelheim's (BI) Spiriva HandiHaler (Tiotropium bromide inhalation powder) for the treatment of chronic obstructive pulmonary disease (COPD). The drug is the first inhaled treatment for COPD. Analysts predict sales of Spiriva to peak at approximately $2 billion. It is already available in over 40 other countries. BI will co-market the drug with Pfizer. FDA Approves Erbitux The U.S. FDA approved Imclone's Erbitux (Cetuximab), the first monoclonal antibody approved to treat advanced colorectal cancer (CRC) that has spread to other parts of the body. Imclone and marketing partner Bristol-Myers Squibb Company (BMS) expected to launch the drug by the end of February. Lonza Biologics' Portsmouth, N.H., manufacturing facility has also been approved by the FDA for initial production of Erbitux. Eventually production will be moved to Imclone's BB36 facility in Branchburg, N.J. once approval is received for this site. Glaxo to Pay $400 Million to Settle Antitrust Case GkaxoSmithKline (GSK) will pay a total of $400 million (GBP 200 million, Euro 322 million) to settle a U.S. antitrust case concerning its anti-inflammatory drug Relafen. Of the fees, $175 million (Euro 141 million) will go to direct purchasers and wholesalers. Another portion will cover a claim from a group of indirect purchasers that includes consumers. The remainder is accounted for in settlements previously paid to Israeli pharmaceutical firm Teva, a group of drug stores, and Eon Labs, a U.S. generics manufacturer. J&J to Buy Out European Pharma JV Johnson & Johnson plans to purchase the 50 percent share of Johnson & Johnson MSD Europe that belongs to Merck. Financial terms of the deal were not disclosed. Johnson & Johnson MSD Europe is a non-prescription pharmaceuticals joint venture and will become a wholly owned subsidiary of J&J upon completion of the acquisition. The other 50:50 joint venture between the two companies - Johnson & Johnson Merck Consumer Pharmaceuticals - will not be affected by the deal.