LONZA TO BUY ARCH CHEMICALS SPECIALTIES: Acquisition will make
the Swiss company a leader in the microbial control market
T
O HELP SHIFT its business away from the vola-
tile active pharmaceutical ingredient (API) area, Lonza plans to acquire Arch Chemicals in a $1.4 billion cash deal. Although it will still have a leading position in custom manufacturing, the Swiss company will benefit from a new 15% share of the $10 billion-peryear antimicrobial market. The deal offers a “unique opportunity” and “marks the next step of Lonza building a world-class life science company,” Lonza CEO Stefan Borgas said in a conference call with analysts. The combined company will have about $4.3 billion in annual sales, with 43% in microbial control products, 35% in custom API manufacturing, and 22% in life sciences and nutrition products. Custom manufacturing, especially for biologics, currently accounts for more than half of Lonza’s sales, whereas microbial control is about 14% of sales. Acquiring Arch will help strengthen and balance Lonza’s portfolio in many ways, Borgas said, and Lonza can improve Arch’s profitability. He also expects that Lonza’s custom manufacturing business will continue to grow. Despite Borgas’ assurances, investment analysts question the attractiveness of buying a less profitable, cyclical, and mature business at what some call a hefty price. Lonza’s dramatic shift away from pharmaceutical ingredients is “an effort to rebalance the business toward industrial end markets to reduce the risk attached to the declining opportunities within recombinant production technology,” Citigroup Global Markets analyst Dominik Frauendienst told clients.
About 86% of Arch’s $1.4 billion in annual sales falls into four microbial control areas: water products, wood protection, industrial biocides, and personal care. Lonza will support Arch’s decision to find a buyer for its performance products business, which had sales of $186 million in 2010. Arch has 23 primary manufacturing and research facilities around the world and employs about 3,000 people. Lonza operates six antimicrobials production locations with a workforce of 550. The acquisition will expand Lonza’s business in China, India, Brazil, and South Africa, which are among the fastest-growing markets for microbial control. Because the companies’ products are complementary, Lonza notes, antitrust issues should be avoided and sales in the firms’ respective markets have the potential to expand. In fact, Lonza expects to generate $40 million in new sales within three years by Arch Chemicals supplies biocides leveraging the technical capabilities, for use in antibacterial soaps. applications expertise, and extended reach of the two businesses. New formulations should emerge quickly by combining already approved microbial agents, and the company’s larger scale will enable it to invest in R&D for new products, Borgas explained. Lonza expects $50 million in annual cost savings, largely by eliminating redundant administrative functions. Taking advantage of the strong Swiss franc, it will finance the purchase entirely through debt. After buying Arch stock—at a 37% premium to the firm’s recent share price—and getting regulatory approvals, Lonza hopes to close the deal later this year.—ANN THAYER
INVESTIGATION Safety board report on 2010 accidents says DuPont was lax on safety action Had DuPont followed its own safety recommendations, it might have avoided a series of accidents at its Belle, W.Va., plant in 2010 that caused the death of one worker, the Chemical Safety & Hazard Investigation Board (CSB) concluded in a preliminary report, released on July 7 at a news conference in Washington, D.C. The death was caused by a braided pipe that burst, spraying a worker with phosgene (C&EN, Feb. 1, 2010, page 8). DuPont records show that the pipe had not been maintained properly and that
the company was aware of the safety issue and was considering upgrading to a safer pipe material and improving other phosgene safety measures. But the firm never made the changes, CSB found. “These kinds of findings would cause us great concern at any chemical plant, but particularly at DuPont, with its historically strong work and safety culture,” CSB member John Bresland said at the news conference. “I would hope that DuPont officials are examining the safety culture company-wide.” DuPont says it has completed its own
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investigation of the accidents and is fully cooperating with CSB as well as state and federal agencies. The company also says it has implemented many of the recommendations of the CSB report for the Belle facility. These include performing an intensive safety operations review, improving the hose maintenance system, strengthening its process hazards review system, and initiating a new alarm management system. CSB will accept public comments on its draft report through Aug. 22.—DAVID HANSON
ARCH CHEM ICA LS
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