ngin - Norfolk Genetic Information Network
Date:  15 November 2000


'All three companies had backed the concept of  "life science" - marrying expertise in health care and agriculture. The divestments reflect the demise of this grand idea.'

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LONDON, 15 November -  Aventis SA said on Wednesday it planned to divest its agrochemicals and seeds business to focus on faster-growing pharmaceuticals in a move investors said could increase its market rating.

The majority-owned business -- which has been tarnished by recent controversy over its StarLink genetically modified maize -- could fetch some six billion euros ($5.14 billion), analysts estimated.

The Franco-German company is following the lead of Swiss and British rivals Novartis AG and AstraZeneca Plc which recently merged and spun off their agchem interests into a new company, Syngenta AG .

All three companies had backed the concept of  "life science" - marrying expertise in healthcare and agriculture. The divestments reflect the demise of this grand idea.

"I welcome the move. We don't want to buy conglomerates anymore," said Eric Bernhardt, a fund manager with Clariden private bank in Zurich who owns Aventis.

"Agriculture is a low growth area and has been dragging down the rest of the company. The market growing only two to three percent a year against the 11 percent or so revenue growth expected from pharmaceuticals."'

Shares in Aventis, which have outperformed the market by 19 percent so far this year, gained 2.4 percent to 88.35 euros by 0950 GMT.


Aventis- which was formed last year from the merger of Rhone Poulenc and Hoechst - said it would evaluate all value-enhancing options including a potential public offering of Aventis CropScience under the name Agreva. It aims to complete the divestment by the end of 2001.

"Since the creation of Aventis, market consolidation in both the pharma and agriculture sector has accelerated. By effecting the separation, Aventis would achieve strategic flexibility, clarity and enhanced performance focus for both businesses," it said in a statement.

But Aventis may find it tough to get a good price for the business, with the sentiment towards the sector soured by slack demand from a depressed farm sector and mounting public concerns about genetically modified (GM) produce.

The GM row was reignited by the recent discovery of StarLink corn, approved for animal feed, in consumer foods in the U.S., sparking worries about possible allergic reactions and leaving Aventis vulnerable to liability claims.

Syngenta's debut has not been auspicious. The stock floated on Monday but fell below an already low the issue price, reflecting widespread selling by fund managers.

David Beadle, pharmaceuticals analyst at UBS Warburg, said he had recently cut his valuation on Aventis CropScience to six times enterprise value/Ebitda, from nine times previously, reflecting the poor valuations achieved by Syngenta and U.S. firm Monsanto. That would imply a price around six billion euros.

Putting Aventis CropScience up for sales showed Aventis "is not letting itself be affected by the weak valuation of Syngenta," said Philippe Lanone, analyst at CDC Bourse in Paris.

He said it would have been worse if Aventis had decided to keep its agrochemicals division just because of Syngenta's lacklustre debut.


Aventis spokesman Carsten Tilger said the company had been in touch with German pharmaceutical group Schering AG but he declined to speculate on whether or Schering would opt to retain its 24-percent holding in CropScience.

"We have informed them about our plans and now we are in talks about how we will proceed in a joint way,"' he said.

Schering confirmed it would begin talks with Aventis on the disposal of the unit.

UBS Warburg's Beadle said Schering might be reluctant to sell its stake in the business - particularly if such a move left it vulnerable to a takeover bid.

"Any predator will find Schering far more attractive with 1.5 billion euros of cash on its balance sheet than a stake in an agchem business, so they may well hold on to their 24 percent stake," he said.

Schering shares, which have outperformed the European sector by 28 percent this year, dipped 1.6 percent to 66.30 euros.

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