Akzo will be looking at the drug group-divisions or research pipelines with something
DJ Akzo Nobel Ups Disposal Plan, Eyes 3 Assets
Dow Jones News Service ~ September 5, 2003 ~ 1:45 am EST
(This story was originally published Thursday)
By Michael Reid
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Still wedded to its ambition to make it big in pharmaceuticals, Dutch conglomerate Akzo Nobel NV (AKZOY) said Thursday it plans to sell three chemicals businesses in a move which could raise about EUR1 billion.
Akzo said it'll sell its catalysts, coating resins and phosphorus chemicals operations. These represent close to EUR1 billion in sales, almost double the amount the company had initially told investors in May it would dispose of.
An Akzo spokesman told Dow Jones Newswires that asset sales in the chemical sector usually fetch between 1 and 1.2 times sales. Based on this measure, Akzo would fetch at least EUR1 billion for the operations it has earmarked for sale.
The disposal plan will be another key test for Chief Executive Hans Wijers - the former Dutch economics minister who took the helm of Akzo in May. Until now, Wijers' cost-cutting and plan to sell assets have won him praise from analysts, helping Akzo's shares recover part of last year's heavy fall triggered by problems at its drugs division.
But long-term, industry experts think Akzo is worth more if it splits off its drugs arm from chemicals and paints, or even finds a drugs partner to give it more scale.
Wijers made it clear he won't be rushed with the disposals: "It will be clear from this that we expect to realize more than the EUR500 million announced in May this year, but we are not in a race against the clock to sell," he said in a statement.
Wijers' plan is to sell assets and use the proceeds to cut debt, preserve Akzo's single-A credit rating and buy some more paints businesses. It can then use this financial stability to revive its sputtering pharmaceutical arm.
At 1500 GMT, Akzo shares were up 1.4% at EUR30.58. Dutch analysts welcomed the plan, showing Wijers' is putting his talk into action.
Akzo has long-held ambitions to grow in pharmaceuticals because drugs profits and margins are juicier than in paints and chemicals. But the division has been beset by problems and Akzo's drugs cabinet looks a little thin.
Indeed, Akzo's second-quarter net profit fell 20% to EUR201 million, mainly because of falling sales at its drugs arm Organon.
The problem is, sales of the big-selling antidepressant Remeron which was once the mainstay of Akzo's drugs' profits will continue to evaporate. The drug has lost patent cover in the U.S. and generic drugmakers are lining up to launch copycat versions. This competition will intensify in the coming months. The Remeron patent in Europe expires next year.
What's more, the three drugs Akzo had banked on to plug the earnings gap have faltered.
Of these three - antithrombotic Arixtra (known colloquially as a 'clot- buster'), osteporosis treatment Livial and antidepressant Gepirone ER - only Arixtra has been launched in the important U.S. market.
Earlier this week, French drugs company Sanofi-Synthelabo (F.SAN), which co- markets Arixtra, revised down its peak sales forecast for the drug to EUR500 million from EUR800 million. Peak sales refers to the annual sales the drug will probably reap in its best year, which is usually a few years after its launch.
Gepirone ER won't be launched in the U.S. until 2004, while Livial can't be expected before 2006.
Also, women in the U.S. have been slow to adopt Akzo's novel non-oral contraceptives like Nuvaring, which releases
a steady stream of contraceptive hormones once inserted into the vagina.
-By Michael Reid, Dow Jones Newswires, +44-207-842-9292, Michael.Reid@ dowjones.com
(Neil Moorhouse, Joana Quintanilha, A.J. Hesselink and Maarten Dijksma contributed to this story).
(END) Dow Jones Newswires
09-05-03 0145ET |
