Earlier today DSM and the Swiss healthcare group Roche have announced that DSM intends to acquire Roche’s Vitamins and Fine Chemicals Division. So far both companies have reached agreement over the price and payment terms and they expect to reach agreement on all other terms.

The total value of the transaction will be  2.25bn (around $2.2bn). All present and future liabilities arising from the price-fixing cases against the vitamins business will remain with Roche.

Currently Roche’s Vitamins and Fine Chemicals Division is the world’s leading supplier of vitamins and carotenoids. In addition to vitamins and carotenoids the division also manufactures citric acid, and additives for animal feed, food, cosmetics and pharmaceuticals. In 2001 the division, headquartered in Kaiseraugst, Switzerland had annual sales of CHF3.5bn ( 2.4bn / $2.35bn). In the first half of 2002 the division generated sales of CHF1,747m ( 1,180m / $1,025m), about 4% below the first half of 2001 in local currency terms. EBITDA in the first half of the year was CHF256m (14.7% of sales), and the operating profit amounted to CHF140m (8% of sales). The division, which currently employs 7,500 people, will become a business unit of DSM.

Earlier in the year Roche has forecast slow growth for the division, and for 2002 it expects lower margins, mainly due to intense competition in the market for vitamins.

Amidst rumours about the sale of the division that have been in the market for a while the general expectation was that the price would come in at around 1.1 times annual sales. The price agreed on now is well below that level, at 0.94 times annual sales.

The acquisition fits well into DSM’s current strategy which involves a concentration of the company’s business on life science products and performance materials. Recently the company sold its petrochemical business to Sabic of Saudi Arabia.

DSM aims to reach sales of around  10bn by 2005. In the first half of 2002 the company had sales of  2.8bn, with an operating profit of  183m (6.5% of sales). The net profit was 1,027m, including the extraordinary profit from the sale of the petrochemical business.

The current transaction needs approval from the relevant antitrust authorities.

The information provided in this document is believed to be correct but cannot be guaranteed. Opinions constitute our judgement as of this date and are subject to change.