Workers demo to protest R-P/Hoechst merger

17 February 1999 18:37  [Source: ICIS news]

LONDON (CNI)--French union CGT has called for workers to stage protests on Thursday (18 February) over job cuts in the Aventis merger between French group Rhone-Poulenc (R-P) and Germany's Hoechst, but German employee representatives have taken a wait and see view on the expected redundancies.

Hubertus Schmoldt, chairman of the German chemical union IG BCE, said Hoechst would have to stick by the job protection pact signed last year with employees of pharmaceuticals division Hoechst Marion Roussel (HMR), which runs to 2002. He said the union has been talking to HMR about the impact of the merger with R-P, but added that job cuts have not been discussed.

Arnold Weber, head of HMR's German works council, said the redundancy figures reported from a leaked report last week were "alarming, if they are correct". He said the works council cannot see where additional job cuts could be made following previous redundancies in the R&D and marketing activities.

A spokesman for HMR told CNI that no decisions have yet been taken on job reductions as a consequence of the merger. He said a number of task forces have just began work on the questions of possible cost saving synergies from the merger and would report to the board in the second quarter. The companies are not expected to finalise their decisions on cuts before July, he added. A number of consultants are supporting the task forces, including US firm Boston Consulting, he said.

In December, the companies announced that by combining their life sciences assets they could save more than $1.2bn (about Euro1.06bn) over three years. Around 60% of the savings were expected to come from pharmaceuticals and the remainder in agriculture and other areas. Hoechst and R-P said job cuts would form part of savings but they did not give any estimates of possible numbers.

The HMR spokesman said that the Aventis report by US consultant Monitor, which was anonymously leaked in France last week, did not contain official figures on cuts expected from the merger. The leaked Aventis study reportedly told of 11 000 job cuts over three years and the sale or closure of 49 of 91 production sites.

The spokesman would not comment on the reported figures but said Monitor's study was only one of a number undertaken by consultants prior to the merger announcement last December. The report was a preliminary study looking at one possible scenario, he said. The spokesman added that he expected HMR's French representatives and R-P to be investigating the source of the leaked report.

Meanwhile, other reports suggest that the Kuwaiti Petroleum Co, which manages Hoechst's largest block of shares (24.5%), has been unhappy about the merger plans because of a difference in views on the reckoned R&D benefits of combining the pharma pipelines of each company.

Another spokesman, for Hoechst, told CNI the company was in constant talks with stockholders including the Kuwaiti shareholders, which are represented on its supervisory board and have held their same percentage stake for 17 years. The supervisory board approved the merger on 8 December and the spokesman noted that while the reports suggest the Kuwaitis want to see more R&D spending, Aventis will have a combined R&D budget of almost $3bn, with around $2.5bn in the pharmaceuticals business.

The spokesman added that yet further reports on the possible change of equal shareholding in Aventis between R-P and Hoechst were "a lot of hot air". He said: "Both companies are committed to a merger of equals, and while we don't expect a significant deviation from the fifty-fifty share, we have mentioned it might not be fifty-fifty in three years."

While the companies plan to take the first step in creating Aventis in the middle of this year by forming a 50:50 life sciences joint venture, he said that the disposal of each group's chemicals assets [Hoechst's Celanese and R-P's majority stake in Rhodia] would give each different sums of money. He acknowledged that the differences could shift the equity balance but said "we are confident we will find a way to remain a merger of equals". He added that the nature of the "equals" relationship goes beyond the equity balance to include equal governance rights.

"There has not been any change of plan," he said.

Additional reporting by Dede Williams in Frankfurt

ICIS Copyright © Reed Business Information 2009

Author: Patrick Reynolds
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