"Landep News"
The world’s largest producer of drug ingredients, Lonza Group AG decided to purchase Arch Chemicals Inc. The price paid for the transaction was of around $1.2 billion in cash and allowed Lonza to become the global leader of the killing bacteria and fungi business.
The price per share paid by Lonza was of $47.20 which involves a 12% increase of the closing price recorded on July 8. In the same day, the shares of the Arch Company, which is located in Connecticut, increased by 11%, the highest level recorded in the last 14 months.
The Arch Company is known for its products used to kill microbes in swimming pools, stop the growth of mold and mildew in paint, protect wood from fungus and treat dandruff. The takeover will transform the Lonza Company in a market leader evaluated at $10 billion. The company will become part of a market that records an increase of six percent per year. This deal will also reduce Lonza’s need to produce pharmaceutical ingredients for drug making companies in order to obtain profit.
Peter Welford, an analyst of Jefferies International Ltd. London, said that this acquisition involves “a strong strategic rationale” which allows the two firms to unite complementary businesses and to increase the sales of Lonza in the emerging markets.
The Lonza shares recorded only a down fall of 0.2 % in Zurich today. Since the beginning of 2011 their stock has dropped 8.2%, so today the results were good news. Because of that down fall, the company’s market value had dropped at 3.5 billion francs (around $4.2 billion).
This acquisition will be followed by the opening of a unit expected to provide $1.4 billion in sales and increase the revenues by 40 centimes per share in the first year after the acquisition will be completed. Lonza thinks that the cost savings will be of around $50 million annually by the second year after the takeover while the sales will increase by $40 million.
This deal is supposed to increase the sales of Lonza in Brazil, India, China and South Africa from the current $35 million to $249 million in the near future. The company is also thinking about selling the Arch’s performance products unit which manufactures adhesives, chemicals for coating, antifreeze and cleaning products.
On July 15, Lonza will start the takeover process and the deal is expected to be closed this year. Regarding the money needed for making the payments, Lonza’s officials said that they will use bridge loans from banks and they will refinance the loans with the help of bonds and other new loans. This deal comes as a recommendation of the CEOs of both companies.
Today, Arch shares were traded at $46.77 when the New York Stock Exchange opened. That means an increase of 11% since July 8.
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