Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, May 5, 1995 TAG: 9505050085
SECTION: BUSINESS PAGE: A-11 EDITION: METRO
SOURCE: Associated Press
DATELINE: KANSAS CITY, MO. LENGTH: Medium
The all-cash deal is the largest U.S. acquisition ever by a German company and would create a drug maker with about $10 billion in sales, Hoechst and Marion said Thursday.
If regulators approve, it would give Hoechst a foothold in the world's biggest drug market, a move analysts said could stabilize its sometimes volatile profits.
The buyout throws a financial life preserver to Marion, which has been squeezing the last drops of profitability from drugs facing increasing competition from cheaper generics.
Drug-maker earnings have been pressured by health care plans and insurers in the U.S. and governments overseas, all looking to curb costs. Thursday's deal continues the two-year trend of mergers and consolidation that has been the industry's response to the profit squeeze.
Hoechst AG also owns the Hoechst Celanese plant at Narrows, which employes about 1,850 people. It makes filter products, textile filament and acetate polymer.
Winston Faust, manager of the Narrows plant, said acquisition of Marion Merrell Dow will have "very, very little, if any" impact on the Western Virginia operation.
He said the plant at Narrows concentrates on the fiber and chemical part of Hoechst's operations while the pharmaceuticals are operated independently. "It's almost run as a separate business," Faust said.
In February, Hoechst and Marion confirmed months of rumors when they announced they were considering a deal.
Hoechst will move up from the world's fourth-largest drug company to the third-largest, behind Britain's Glaxo-Wellcome PLC and the U.S.'s Merck & Co. The dollar's decline could boost Hoechst to No. 2 in 1995.
Hoechst will pay $25.75 a share for Kansas City-based Marion, first buying out Dow Chemical Co.'s 71 percent ownership stake before offering the same amount for all remaining shares.
Hoechst's worldwide drug business will be conducted under the name of a new company, Hoechst Marion Roussel, to be based in Kansas City.
``We need a partner with a strong North American sales network, contacts with the regulatory authorities, access to the innovative field of biotechnology research in the United States, a complementary product line and a strong clinical research effort,'' Jurgen Dormann, chairman and chief executive of Hoechst, said Thursday.
Marion needs help too. It has no big moneymaking drugs in its development pipeline and its established products, the Cardizem family of heart medicines and Seldane family of allergy medicines are either facing, or are soon to face, generic competition.
Analysts generally praised the deal, despite Marion's weaknesses.
Charles Brown, of Goldman Sachs in London, said it will give Hoechst protection from the ups and downs of its chemical businesses.
Hoechst also gets Marion's respected skills marketing drugs to health maintenance organizations and other managed care plans, analysts said.
Marion also owns The Rugby Group, a leading distributor of generic products. Dormann said in March that the company planned to expand its generic drug business.
Hoechst's pharmaceutical division is now known as Hoechst Roussel Pharma, with a U.S. base in Somerville, N.J. Its sales last year totaled about $6.3 billion. Marion earned $438 million on sales of $3.1 billion last year.
Hoechst AG had sales of $30.6 billion in 1994 and earned $841 million. The company was created by the Allies in the postwar dismantling of I.G. Farben, the Nazi-linked firm that exploited slave labor and produced Zyklon B, used in the gas chambers.
Hoechst (pronounced ``Herxt'') is a major player in the pharmaceutical, agricultural and industrial chemical sectors in Europe, Asia and the Americas. Its Hoechst Celanese chemical subsidiary in the United States accounts for a substantial portion of the company's overall business.
The New York Stock Exchange-listed Marion Merrell Dow rose 871/2 cents to $25.12 1/2 in Thursday's trading.
Staff writer Mag Poff contributed to this story.
by CNB