Roche signs vitamins, fine chems deal with DSM for only Euro1.95bn, makes extra provision for price fixing claims

LONDON (CNI)--Swiss pharmaceuticals giant Roche has completed its exit from vitamins, carotenoids and fine chemicals by signing an agreement to sell these businesses to Dutch chemicals group DSM for Euro1.95bn ($2.11bn) - some Euro300m or 13% less than the two companies indicated in September.

In a joint statement released on Monday evening, Roche and DSM said the reduced price reflected the continued slow-down of the world's economies and the weakening of the value of the US dollar versus the Swiss franc. They said both factors had a negative impact on the vitamin business performance compared to earlier forecasts.

As already announced, the present and potential future liabilities from Roche's vitamin price fixing case will remain with Roche. It disclosed  today that provisions for all claims from US customers had increased by SF570m ($420m/Euro389m) to SF1.77bn for the full year 2002. Roche explained that in recent weeks it had settled all outstanding litigation with direct US customers and said agreements could also be reached with the majority of indirect US customers. It does not expect any further provisions will be required for US price-fixing claims.

The sale deal signed today with DSM, which is subject to approval by the anti-trust authorities, commits the Dutch company to pay Roche Euro1.85bn in cash plus 2.24m DSM shares with a value of approximately Euro100m. For this purpose, DSM will purchase these shares on the market and deliver them to Roche.

Roche and DSM said the deal is expected to close in spring (Q1/2) this year.

The transaction will result in an accounting impairment of operating assets of SF1.65bn ($1.22bn/Euro1.13bn), which will be recorded in Roche group's 2002 year-end results.

Roche's vitamins and fine chemicals division researches, produces, markets and supplies vitamins, carotenoids, citric acid and other fine chemicals for the animal feed, food, pharmaceutical and cosmetics industries. In the first nine months of 2002 the businesses had sales of SF2.57bn.

Peter Elverding, DSM chairman commented: "I am delighted that DSM and Roche have reached final agreement. The discussions with Roche over the last months have confirmed the fundamental attractiveness of these businesses, and its potential for result improvement. I am confident that this acquisition is a major reinforcement of the DSM group, and that it will be earnings-per-share enhancing right away. For DSM this transaction is a very significant strategic step in our ongoing transformation into a specialties company."

Franz Humer, chairman and chief executive of Roche said: "The sale of the division brings a significant part of our history to an end. The transfer of our vitamins business takes place at a time when the world's economies are facing important challenges. We therefore are very pleased that an agreement was reached with DSM, a company which in combination with our vitamins unit will have a unique and coherent portfolio of businesses and leading technologies. This is a solid basis offering excellent prospects and continuity to the division and its employees. For Roche, this agreement allows us to further focus our group on our two high-tech pillars, pharmaceuticals and diagnostics to further establish our position as a leading, innovation driven healthcare company."