May 2004 Aventis Accepts Higher Bid from Sanofi Just four days after Novartis announced that it would begin merger talks with Aventis, Sanofi-Synthelabo raised its bid for Aventis from $58 billion (Euro 48 billion) to $65 billion (Euro 54 billion). Aventis, reversing its opinion about the once hostile take-over attempt, accepted the 14 percent higher bid and has agreed to merge with Sanofi. The new company, to be called Sanofi-Aventis, will be headed by Sanofi's chairman and chief executive Jean-Francois Dehecq. It will be the third largest pharma company worldwide. The merger was approved by all Aventis board members except two employee representatives. Aventis will withdraw all claims against Sanofi that it made during its attempt to fight off the initial hostile-takeover attempt. The European Commission has approved the merger with some conditions that Sanofi will address through sale or licensing of different drug products. GlaxoSmithKline will purchase the production and marketing activities relating to the anti-coagulants Fraxiparine and Arixtra for $548 million (Euro 453 million). Sanofi has also agreed to sell its colorectal cancer drug Campto (which Aventis has licensed in several countries) and its vitamin B12 product Delagrange. Rights to other drugs of concern will be licensed to third parties.   Famous Quotes of the Month - Striving for excellence motivates you; striving for perfection is demoralizing. (Harriet Braiker) - The trouble with being punctual is that there's nobody there to appreciate it. (Franklin P. Jones) - A chip on the shoulder is too heavy a piece of baggage to carry through life. (John Hancock) - It takes self-confidence to say "I'm sorry." (Alexandra Stoddard) - Remember that as you climb the ladder of success, there is always someone behind you keeping it steady. (Jacob M. Braude) Why Doesn't Milk in the Refrigerator Taste as Cold as the Water and Soda? Actually, milk in the refrigerator does get as cold as the water and soda. You can test this easily by sticking a thermometer into each. But milk at the same temperature as water or soda doesn't taste as cold to us because milk contains fat solids whereas water and soda do not. We perceive solids as less cold than liquids. This is referred to as "taste feel." As an experiment, put some high-butterfat ice cream in the freezer along with low-fat or nonfat yogurt. You'll find that the yogurt will taste colder than the ice cream. BASF Looks to China as Center of Asian Activity China will serve as the key location for BASF's manufacture of products for the Asia-Pacific region. The company plans to produce 70 percent of its goods for this area in China, and also hopes to gain 20 percent of global sales from Asia by 2010. BASF will continue to make investments in the region as needed, with nearly $2.45 billion (Euro 2 billion) already planned between 2001 and 2005. Company executives predict that by the year 2015, China will be a larger market than either the U.S. or Europe. Borden Invests in China In addition to opening a regional office in Shanghai, Borden Chemical has formed two joint ventures with Chinese producers. Asia Dekor (Hong Kong) Borden Chemical Co. Ltd, formed with Asia Dekor Holdings Ltd., will construct a new plant to manufacture formaldehyde and derivative resins for the medium-density and particleboard market. The plant is expected to start up in mid-2004. Borden UV Coatings, created with UVITech (Shanghai), will produce UV-curable coatings and adhesives for fiber optics, digital media, and other applications. Dow Corning Comes Out of Chapter 11 Dow Corning hopes to emerge from bankruptcy as of June 1 when it settles $2.35 billion (Euro 1.94 million) worth of silicone implant claims against the company. The date for the settlement was established by the US Bankruptcy Court in Detroit. The only major change for the company will be that it no longer will need to refer to the court for approval for major decisions and investments. Dow Corning is a 50:50 joint venture between Dow Chemical and Corning. Dow to Reduce Global Workforce Further As part of a continuing restructuring plan, Dow Chemical will reduce its workforce by 3000 jobs in addition to the 3500 reductions it implemented in 2003. Some of the new losses with take place through normal attrition and others will result from the sale of businesses. Other job cuts will be layoffs and some will come from the closure of facilities. Overall, the reductions represent 6.5 percent of Dow's global workforce. General Chemical No Longer in Bankruptcy Completion of a financial reorganization within General Chemical Industrial Products has enabled the company to emerge from Chapter 11 bankruptcy protection. The restructuring included reduction of debt by $106 million down to $52 million along with acquisition of a $17.5-million revolving credit facility and a $45-million term loan from Harbert Distressed Investment Master Fund. The company also appointed COO De Lyle Bloomquist as president and CEO, replacing John Kehoe. Helm Invests Euro 65 Million in Expansion Plan Helm Group will invest Euro 65 million to expand its operations in China, Poland, the U.S., Mexico, Brazil and Argentina. Part of the plan includes a new distribution center for industrial chemicals in Guangzhou, China, which will be in addition to existing sales offices in Beijing, Shanghai, Hong Kong and Guangzhou. Beginning in late 2006, Helm will also market ethanol produced by two planned facilities in Oman as part of a joint venture with Oman Methanol Corporation. Huntsman to Close TiO2 Capacity Huntsman plans to reduce production of TiO2 in the UK and South Africa in order to improve competitiveness. Capacity at its Grimbsy, UK plant will be reduced by half to 40,000 tonne per year, while production at the Umbogintwini, South Africa plant will cut by slightly less than a third to 25,000 tonne per year. Approximately 300 jobs will be lost as a result of the cutbacks, which are expected to be completed within the next 12 months. New U.S. President for Cognis Paul S. Allen has been appointed head of U.S. operations for Cognis and is replacing the retiring Michael Miller. Allen will continue to serve as head of Cognis' nutrition and health business. Chemical M&A Picking Up in Europe Analysts predict that the next peak in the M&A cycle will be in 2009, with activity already on the rise, especially in Europe. During 2004 it is estimated that chemical assets valued at about $12.2 billion (Euro 10 billion) will be on the block in Europe. Private equity firms are predicted to snap up greater than 40 percent of the businesses. Strategic pressures are driving companies to divest, and many are accepting slightly lower valuations in order to achieve necessary restructuring goals. Global Recovery for Chemicals Industry The American Chemistry Council (ACC) reports that the global chemical industry experienced strong growth in 2003. Rapid growth in volume activity within the chemical industry is occurring around the globe. An increase just shy of 7 percent in February as compared to a year ago is a sign that an accelerating recovery is occurring. ACC attributes the growth to improving economies in most nations, inventory re-stocking and the recovery in end-use manufacturing activity. Strong gains in Russia, Central & Eastern Europe, India and China helped fuel the overall growth numbers. A sustainable recovery in Western Europe does remain questionable, though, as this region continues to struggle with the high value of the Euro. ACC warns, though, that continued high energy prices could slow global growth significantly. New Intellectual Property Rules in Europe New rules on the licensing of patents, know-how and software copyrights were adopted by the European Commission (EC) with the goal of reducing the regulatory burden on companies while still maintaining control over firms that have large market shares. The new rules will work in conjunction with updated antitrust enforcement rules to be published in May by the European Union. As long as certain market thresholds are not surpassed, companies will not have be concerned about whether or not their agreements are compatible with EU competition law. The rules can be found at: http://europa.eu.int/comm/competition/whatsnew.html. Pharma and Biotech Lead Investments in Academic Research in Europe Analysts believe that collaboration in chemical research and development between academia and industry will be necessary if the European Union is to establish itself as a leader in the global chemicals market. Pharma and biotech companies have formed the greatest number of relationships with university-based research departments, but many chemical companies are beginning to make alliances as well. Some are installing company-staffed satellite facilities at universities, while others sponsor doctoral students. Corporate-sponsored symposia on leading-edge topics such as nanotechnology are also a means for forging relationships with academic research groups. Akzo to Sell Refinery Catalysts Business to Albemarle Akzo Nobel has agreed to sell its refinery catalysts business to Albemarle for $752 million (Euro 625 million. The deal is subject to approval by Akzo's works council in the Netherlands and regulatory agencies and is expected to be finalized by the end of the second quarter of 2004. The refinery catalysts business, with sales of Euro 350 million in 2003, produces fluid catalytic cracking catalysts (FCC) and hydro processing catalysts (HPC) for oil refining, and chemical processing catalysts (CPC). Albemarle will create a new Polymer Additives business that will consist of the Akzo catalysts operations and its existing catalyst products plus other polymer additives and flame retardants. Biocides Sale Complete Avecia completed the $215 million (Euro 173 million) sale of its biocides business to Arch Chemicals. Avecia will use the proceeds to pay down debt. The acquisition expands Arch's biocides activities in key markets and fits its growth strategy. Blackstone Completes Celanese Acquisition After obtaining the acceptance of 83.6 percent of shareholder's votes, private equity firm Blackstone completed its acquisition of Celanese. The minimum bid threshold had been lowered to 75 percent by Blackstone from the initial 85 percent level. Blackstone will pay $3.8 billion (Euro 3.1 billion). The new owners also anticipate squeezing out minority shareholders in order to gain 100 percent ownership of Celanese. Once Blackstone receives a domination agreement from the German courts, which is expected in the next few weeks, it will have operating control of the company. Dynamit Nobel Goes to Rockwood Specialties MG Technologies sold its Dynamit Nobel chemicals business to Rockwood Specialties Group for $2.7 billion (Euro 2.25 billion). Rockwood is getting financial support for the deal from private equity groups Kohlberg Kravis Roberts (KKR) and Credit Suisse First Boston (CSFB). The deal is subject to regulatory and shareholder approval and is expected to close in the third quarter of 2004. Rockwood will be gaining Dynamit's Chemetall, Sachtleben, CeramTec and DNES businesses. Rockwood, which was formed after KKR acquired Laporte, will be tripled in size when combined with the Dynamit Nobel operations. For MG, the sale is part of a strategy to become more focused on its engineering-related activities. DyStar Up for Sale A private equity capital firm is expected to purchase the textile dye manufacturer DyStar from joint owners Aventis, BASF and Bayer. The company has sales of approximately $1.1 billion (Euro 900 million) and is the leading supplier of textiles dyes in Asia. Margins have been squeezed in the last few years due to currency exchange rates. Johnson Matthey Acquires Activated Metals Johnson Matthey acquired Activated Metals & Chemicals (AM&C) for $43 million. AMBC manufactures nickel, cobalt and copper catalysts for synthesis of pharmaceuticals and specialty chemicals. Johnson Matthey will merge AM&C's activities into is process catalysts and technologies business. Noveon to be Acquired by Lubrizol Noveon International will be acquired by Lubrizol for $1.84 billion. A new wholly-owned subsidiary will be formed from the merger of Noveon and Lubrizol's Fluid Technologies operations. Once the acquisition is complete, the company's main lube additive business will account for 50 percent of Lubrizol's portfolio, as compared to its current 76 percent share. The purchase provides Lubrizol with a number of high growth specialty chemicals and materials products. Noveon recently refiled for an initial public offering earlier in 2004. Sasol Sells Specialty Chemicals to Elementis Sasol has agreed to sell its specialty chemicals business Sasol Servo to Elementis for $58 million (Euro 48.5 million). The coating additives, pulp and paper chemicals, and specialty surfactants product lines will fit well with Elementis' rheology and surface chemical additives business. Sasol Servo has annual sales of approximately Euro 120 million. Sasol put the business up for sale as part of its 2003 restructuring activities. Themophos to Acquire Rhodia's European Specialty Phosphates Business Thermophos International is negotiating to purchase the European Specialty Phosphates Business of Rhodia. An agreement is expected by the end of the second quarter of*9 2004. The business has annual sales of $90 million (Euro 75 million). Rhodia is also moving forward with the sale of is U.S. specialty phosphates business and has already sold its 50 percent stake in a joint venture with Sintex and Algina Inversion to these two companies. Extractos Naturales Gelymar manufactures carrageenan-seaweed extracts used as texturing agents by the food industry and has annual sales of nearly $17 million. Ultrafine Acquired by Sigma-Aldrich Contract manufacturer Ultrafine has been acquired by Sigma-Aldrich for an undisclosed amount of cash. The medicinal chemistry technology and preclinical and early clinical phase GMP production capabilities of Ultrafine will be combined with the process development and scale up operations of Sigma-Aldrich Fine Chemicals. VWR Sale Complete Private equity firm Clayton, Dubilier & Rice has completed the acquisition of VWR International, the U.S. laboratory distribution business of Merck KGaA, for $1.68 billion (Euro 1.31 billion). VWR earned sales of Euro 2.43 billion in 2003 based on its catalog of 750,000 products that range from test tubes to traditional chemicals to biologic materials. Ephedra Sales to Stop Immediately The U.S. District Court in New Jersey refused to grant an injunction to prohibit the FDA from enforcing a ban on weight-loss supplements containing Ephedrine alkaloids (Ephedra). The FDA's final rule, initially issued in February 2004, is now effective immediately. The FDA believes that products containing Ephedra have been shown to pose unacceptable health risks.