UpdateSolvay may reinvest in Asia after pharma sale - PwC

28 September 2009 17:22  [Source: ICIS news]

(releads and updates throughout)

By Lucy Craymer

SolvayLONDON (ICIS news)--Solvay is likely to consider reinvesting in polymers in Asia following the €5.2bn ($7.6bn) sale of its pharmaceutical business to US company Abbott Laboratories, an analyst said on Monday.

PricewaterhouseCoopers' (PwC) partner Johan van den Arend Schmidt said the Belgian firm was likely to try to move east because that was where demand was.

“It is the logical step for them to go into Asia with polymers,” he said.

While Solvay might look at buying soda ash companies in Europe and consolidating supply, long-term growth was in Asia, the analyst added.

Solvay said in a statement following the sale of the business that once the deal was completed it would be looking to reinvest in “value-added activities and strategic projects in chemicals and plastics”.

Solvay's CEO, Christian Jourquin, said: “We are building a new refocused group with the financial means to further accelerate sustainable growth on today’s strong foundations.”

Other media have reported that Belgian company Umicore might be in Solvay’s sights once the pharmaceutical sale was completed. Umicore’s shares had risen by 3.5% to €20.19 at 17:.23 local time on the Euronext in Brussels.

The market did not react as favourably to Solvay’s news and its share price was down 0.1% at €74.65 on the same index.

The company announced earlier it had sold the pharmaceutical business for €4.5bn in cash, additional potential payments of up to €300m if certain milestones are reached, and liabilities of €400m.

“This transaction is expected to be closed in the first quarter of 2010, pending the approval by relevant competition authorities,” the company added.

Solvay’s decision to divest its pharmaceutical business and focus solely on its chemical interests mirrors other former hybrid companies.

Ratings company Fitch said chemicals firms such as Altana and AkzoNobel had also chosen to divest and this was principally because of the different competitive challenges of the two industries.

Pharmaceutical companies benefited from being larger as competition between them was driven by novelty and treatment advances and the bringing to the market of new drugs rather than by prices, it added.

“Most companies active in the pharmaceutical and chemical industries do not have the financial resources to be strong players in both sectors, primarily due to the different competitive challenges of the respective industries and their limited synergies,” Fitch said.

($1 =  €0.68)

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By: Lucy Craymer
+44 20 8652 3214

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