Aventis CropScience sale may be close at hand

09 July 2001 00:00  [Source: ICB]

Aventis may be 'within weeks' of splitting and selling its CropScience business to Bayer and BASF, say industry sources. It is thought the company is likely to sell its insecticide business to BASF, and the remaining larger chunk to Bayer.

Analysts think the news makes sense as Bayer is losing market share in agrochemicals, and needs to boost this through acquisitions. But if the sale included Aventis' insecticides division, Bayer's worldwide market share would increase to around 30% in that sector, causing anti-trust problems.

Aventis' spokesman Gerhard Waitz denied the rumour: 'Our current position is not to split CropScience, and that remains the case.' Aventis could offer the whole of CropScience to Bayer, which could then immediately sell insecticides, but the European Union requires any anti-monopoly related divestments to take place before a merger can occur. Bayer and BASF declined to comment on 'market rumours'.

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Michael Vara, an analyst at Commerzbank, said: 'This deal would certainly be a good option for Bayer and BASF in terms of synergies because they are European companies, as is Aventis. They will be able to eliminate a head office and at least part of the sales force.' He values Aventis CropScience at E6bn ($5bn), and with the synergies says a realistic bid would be in the region of E7bn.

'Gaining market share is vital for economies of scale and this is one of the last possible major transactions available. It is difficult to gain market share only through organic growth,' Vara added.

Although Bayer and BASF have issued profit warnings, analysts believe they should have no trouble financing the scheme. One commented: 'BASF has no gearing problems - it is a $25bn company with no debt. Bayer has a few more liabilities, but would have no real difficulties.'

Aventis has been trying to sell CropScience for some time so that it can concentrate on focusing more attention on its core pharmaceutical business (ECN 20 November 2000).

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