Monday, September 25, 2006

Nycomed Buys Altana Drug Unit For Around EUR4.5B

German drug and chemicals maker Altana AG (AAA) said Thursday it will sell its pharmaceutical business to Danish drugmaker Nycomed for around EUR4.5 billion.

Altana, based in Bad Homburg, put the unit up for sale last year because the business is lacking is lacking scale to successfully compete in a global pharmaceutical market, marked by ever rising costs for the development of new medicines.

The price of around EUR4.5 billion is below the EUR5 billion to EUR6 billion, which the company and analysts had originally expected, but at the high end of the EUR4 billion range, which German media has speculated about over the past two weeks.

Nycomed said in a statement that the transaction will be financed by new equity and committed debt financing from a consortium of leading international banks. It did not elaborate.

Analysts welcomed the deal.

Sal. Oppenheim's Peter Duellmann said Altana and its employees are no doubt relieved that months of uncertainty has come to an end, with, in his view, an acceptable purchase price. Duellmann rates Altana at neutral.the deal, which is subject to approval from regulators to close by the end of this year. Altana plans to distribute the net gain on the transactions to shareholders in 2007.

According to Nycomed, the combined entities have EUR3.1 billion in sales and earnings before interest, taxation, depreciation and amortization, or EBITDA, of EUR848 million based on 2005 figures.

The headquarters of the new entity will be in Zurich, Switzerland, while the site for research and development will be in Konstanz, Germany, where Altana's R&D was based.

Nycomed is owned by Nordic Capital, Credit Suisse Group's (CSR) private equity arm and Blackstone Capital Partners, an affiliate of the Blackstone Group (BGP.XX). Nycomed has Morgan Stanley as its financial adviser on the deal.

The Danish company developed a product called Zycomb to treat the common cold. It was approved in Sweden in April and is in the process of approval throughout Europe. Zycomb targets a market of around EUR200 million in Europe, Nycomed said in April.

Another drug, called Fentanyl, is aimed at treating pain and is currently in late stage clinical testing.

Three other drugs, partnered with Medicines Co. (MDCO), Acusphere (ACUS) and Xenova Group Plc (XEN.YY), are also in the final stage of clinical testing, and are targeted to treat heart diseases and brain tumors.

The German company Altana has been under pressure ever since mid-2005, when U.S. drug giant Pfizer Inc. (PFE) terminated a cooperation to jointly develop respiratory drug Daxas, which Altana hopes will replace sales of its top-selling ulcer drug Pantoprazol, when the latter will lose patent protection in 2009. Altana is continuing the development of Daxas on its own, and maintains that it has the potential to generate at least EUR1 billion in annual sales.

Pantoprazol contributed nearly 60% to Altana's pharmaceutical sales in the first half of 2006.

Altana, controlled by billionairess Susanne Klatten of the Quandt family, has for months been looking for a strategic partner for its pharmaceuticals unit, arguing that it lacks the financial clout to develop big-selling drugs on its own.

Last November it mandated Goldman Sachs (GS) to find a strategic buyer for the pharmaceutical business. More recently it opened the auction to private equity firms.

Swedish private equity group EQT, in alliance with Bernhard Scheuble, former head of Merck KGaA (MRK.XE), and the Struengmann brothers - former owners of generic drug company Hexal which was sold to Novartis AG (NVS) last year - had bid just under EUR4 billion, people close to the situation had told Dow Jones Newswires.

Altana reported EUR3.27 billion in sales in 2005. Nycomed posted pro-forma sales of EUR747.5 million in 2005.

Altana shares closed Thursday at EUR45.17, up EUR0.52 or 1.2% before they were suspended from trade at 1520 GMT. Deutsche Boerse said Altana shares will remain suspended until 1600 GMT. The German blue chip Dax index ended slightly firmer Thursday.

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