Schering-Plough Corp. said Monday it will buy the pharmaceuticals division of Akzo Nobel NV for $14.5 billion (11 billion euros) in cash, acquiring the Organon brand of birth control and strengthening its drug pipeline with an anti-schizophrenia medication.
The move will dramatically reduce the size of Arnhem, Netherlands-based Akzo Nobel, returning it to its base as a maker of industrial chemicals and coatings. The Nobel in the name derives from the Swedish company founded by dynamite inventor and Nobel Prize creator Alfred Nobel.
Akzo said its boards had approved the deal Sunday and it expected to complete the sale of Organon BioSciences BV to Kenilworth, N.J.-based Schering-Plough sometime in the second half of this year, subject to regulatory approval.
“In a consolidating industry, there are very, very, very few companies left which have strong research ... and a strong pipeline of late projects and new projects that have a long patent life,” Schering-Plough Chief Executive Fred Hassan told a conference call.
He singled out Akzo’s Asenapine, a medication for which the company plans to seek approval from the U.S. Food and Drug Administration as a treatment for schizophrenia and bipolar disorder. Akzo had a deal to jointly market the drug with Pfizer Inc. until last year, when Pfizer pulled out after news that a Phase III trial — the final pre-approval testing of a drug’s long-term effectiveness and safety — had yielded “mixed results.”
But Akzo still plans to seek approval for Asenapine and Hassan was upbeat about prospects.
“We’ve seen this many times before, where very valuable pharmaceutical assets are not very visible ... in a chemical company umbrella,” he said. “We were closely watching this and once we saw (Akzo’s) fourth-quarter results ... being quite good, and also the Asenapine situation get brighter, we obviously thought the moment was right.”
The company said last year it would either sell or float the operations — known as OBS — by the end of March, and its shareholders have already given consent for a divestment. It was to have launched an initial public offering of shares Monday, but those plans were abruptly shelved after the Schering-Plough bid.
In addition to making human birth control, fertility and gynecological medicines, OBS is one of the world’s largest makers of animal medicines and vaccines.
The operations sold were reported in two different segments of Akzo’s 2006 earnings, but had combined sales of around 3.7 billion euros ($4.9 billion) and operating earnings before one-time charges of around 755 million euros ($992 million). They account for less than a third of Akzo’s overall sales, but almost half its profit.
Akzo said it will use 1.3 billion euros ($1.7 billion) of the proceeds to buy back shares.
The company also said it would cut debt, shore up its employee pension fund, look at the most “tax efficient” ways to return cash to shareholders, and added it “aims to continue to grow in the most attractive areas of its coatings and chemicals portfolios through investments.”
Schering-Plough, one of the world’s largest drugmakers, also makes animal medicines. Hassan said the companies were an “excellent fit ... strategically, scientifically and financially.”
He said that some jobs may be cut but did not specify any numbers.
“For the majority of people in OBS and Schering-Plough, there will be no issue regarding selection of overlapping candidates for positions in the new organization,” he said. “Where any overlap does exist, decisions will be based on business logic.”
Organon has 19,000 employees, while Schering-Plough has 33,500.
In a related development, the sudden influx of cash at Akzo Nobel led to a 7 percent surge in shares of Imperial Chemical Industries PLC in London on speculation Akzo may make a bid for it.
Akzo Nobel CEO Hans Wijers declined to comment on specific targets but said the company was interested in doing “deals that make sense in terms of value creation” and not overpaying for assets.
“We clearly have the ambition to remain the leading (largest) coatings company in the world, we see a lot of opportunities there, but we also see quite attractive opportunities in some of the chemicals areas,” he said.
Hassan said the acquisition would be financed with a mix of cash, debt and a possible share issue, and successfully integrating