BASF Purchases AHP’s Cyanamid Division

BASF – Europe’s largest chemicals maker – will pay AHP $3.8 billion in cash and will assume certain debt. Analysts have placed the amount of debt at $100 million. In a separate transaction, AHP – a research-based pharmaceutical and health care products company – is selling certain products to an unrelated party for $28 million. Cyanamid makes herbicides, fungicides and pesticides.

The sale "caps a six-week auction of the business," according to the Wall Street Journal, that included Bayer AG, Dow Chemical Co. and DuPont Co. AHP originally wanted $3 billion for Cyanamid, according to the Journal. In the end, BASF outbid the competing companies and has now joined agrochemical world leaders Novartis, AstraZeneca and Aventis in the continuing consolidation trend in this industry. With the Cyanamid acquisition, BASF claims that it is now the fourth-largest agrochemicals group behind Syngenta AG, Aventis Crop Science and Monsanto. Syngenta is the agribusiness created by the December 1999 merger of Novartis’ Crop Protection and Seeds business and AstraZeneca’s Zeneca Agrochemicals business. (For more information about this merger, click here.)

According to a news release, AHP put the division up for sale after its failed merger attempt with Warner-Lambert Co., which is being acquired by Pfizer Inc. "Since the 1994 acquisition of Cyanamid, the Agricultural Products division has made significant contributions to AHP," said John Stafford, the chairman, president and CEO of AHP. "However," he added, "the sale of Cyanamid reflects AHP’s strategy to focus on our pharmaceutical, biopharmaceutical, consumer health care and animal health products businesses."

BASF said its acquisition of Cyanamid is scheduled to be completed by July 1, 2000, pending approval from anti-trust authorities. The company also said the purchase would more than double BASF’s annual sales in the crop protection business sector, which totaled $1.9 billion in 1999. BASF’s and Cyanamid’s crop protection businesses combined in 1999 for pro forma sales of $3.6 billion.

"Approximately $250 million in annual synergy effects are expected to be generated by the transaction, with approximately half of the benefits to be achieved in the first full year after the acquisition,"' BASF said. It added that the acquisition was expected to boost earnings from 2001 and that it would have no effect on BASF’s share buyback program.

BASF said it would take out loans of up to $1.94 billion to help finance the purchase of Cyanamid. In a conference call to analysts, BASF said it would take five to seven years to pay back the loan and that the company plans to develop 15 new products in the crop protection market by 2006, boosting its sales by about $2.92 billion.

"From a production point of view the two businesses fit well together. BASF is strong in herbicides and fungicides, American Home Products in insecticides," Merck Finck analyst Michael Butscher said in a Reuters news release.

Some analysts questioned the high price paid for Cyanamid and worried about the assumption of debt. News of the acquisition drove BASF shares down 2.94 percent in early Frankfurt trading the day of the transaction. But other analysts said the deal is positive because it bolsters BASF position as one of the world’s top agrochemical producers.

Morgan Stanley acted as AHP’s financial adviser in the deal.