Solvay sells drugs unit to Abbott for $6.6 billion
Belgian drugs, chemicals and plastics maker Solvay
Abbott had agreed to buy the unit to bolster its flagging prescription drug business by giving it a number of new medicines in late stages of testing, sources familiar with the deal had earlier told Reuters.
We are building a new refocused group with the financial means to further accelerate sustainable growth, Solvay's board chairman Alois Michielsen said in a statement.
The enterprise value of the deal is 5.2 billion euros, including 4.5 billion in cash, additional potential milestone payments of up to 300 million euros between 2011 and 2013 and liabilities of about 400 million euros.
In anticipation of future market needs, we are ensuring we have the technologies, products, infrastructure and reach, Abbott Chief Executive Miles White said in a statement.
Abbott said the deal will add $0.10 to ongoing earnings per share in 2010, doubling to more than $0.20 by 2012 and increasing thereafter, all before one-time transaction-related items expected to occur in 2010-2012.
Abbott said it would fund the deal with available cash.
JP Morgan said in a research note that the 5.2 billion euros price significantly exceeded market expectations of 4 to 4.5 billion euros, although in line with its valuation of 5 billion.
The lack of cash returns (e.g. a special dividend) on the back of the deal may be viewed as a disappointment to some investors, but we view this as positive long-term given it emphasizes Solvay management's commitment to investing and growing the core chemicals and plastics businesses.
JP Morgan has a neutral rating on the stock. The pharma sale price implies a sum-of-the-parts valuation of Solvay of 82 euros/share.
EXTERNAL GROWTH
Solvay said the proceeds from the deal will be reinvested in external and organic growth in strategic projects in chemicals and plastics with a sharp focus on long-term value creation.
Studies about such reinvestments are ongoing, it added.
What is important is that we have the cash in house. What we will aim at is reinvesting in activities securing a sustainable growth, Solvay Chief Executive Christian Jourquin told reporters.
He added that Solvay's drugs unit had provided the firm with low cyclicality, less exposure to energy costs and high-added value and that this would be the criteria that would guide Solvay's reinvestment policy.
We consider the change in the business model for pharma will considerably change the size and structure of the business, so what is important is to know when you have to exit a business, Jourquin said.
Abbott co-markets with development partner Solvay the cholesterol treatments TriLipix and Tricor. It is also working in the U.S. on a combination cholesterol treatment with AstraZeneca
The deal will bring Solvay's treatments for Parkinson's disease, Meniere's disease (abnormality of the inner ear), vertigo, and irritable bowel syndrome to Abbott's presence in cardiovascular disease, neuroscience and gastroenterology.
The deal also includes Solvay's vaccines business.
Solvay's Dutch cell-based flu vaccine production facility -- which can produce both seasonal and pandemic influenza vaccines -- was validated earlier this month after a final inspection by Dutch authorities.
Cell-based technology is thought to be more efficient than using chicken eggs and offers greater production scale.
The transaction is expected to be closed in the first quarter of 2010, pending approval by competition authorities and Solvay said it communicate the impact of the deal on its results when finalized. ($1=.6810 euros)
(Additional reporting by Philip Blenkinsop in Brussels, editing by Hans Peters and Mike Nesbit)
© Copyright Thomson Reuters 2024. All rights reserved.