media release

Akzo Nobel reinforces its Pharma Group: Acquisition of Hoechst veterinary business doubles position in animal health.

“Intervet has specifically developed its strong current position on the basis of very successful research and good marketing in the area of animal vaccines. The Hoechst Roussel Vet business complements this with strong positions in other key areas of animal health, thereby substantially enhancing its critical mass and basis for innovative research,” he added.

The acquisition includes all production and research and development facilities and some 2,400 employees worldwide. Hoechst Roussel Vet, with 1998 sales of EUR 450 million, provides veterinarians with antiparasitics, antiinfectives and vaccines, as well as a number of specialty products for both pets and livestock, and feed additives for livestock. Operations are conducted worldwide: 50% of sales are in Europe/Africa, 45% in the Americas and some 5% in Asia/Australia. Research and development is performed in all 5 continents.

“This move comes at the right time for us” said Toon Wilderbeek, General Manager of Intervet, “We’ve established ourselves as a force in the market in our own right and joining forces with Hoechst Roussel Vet makes us a major player across all segments of the industry. It will strengthen our product portfolio and geographical distribution, especially in the Americas, an area with high growth potential, particularly in the pet market.”

“We welcome the integration with Intervet,”said Klaus Dietz, CEO of Hoechst Roussel Vet. “Our companies realized two years ago the competitive strength such a union would produce and we are now excited to imagine the kind of company we can become. Capitalizing on the complementary strengths in biologicals, pharmaceuticals and feed additives, this new company will clearly establish itself as one of the industry’s top global players.”

“The combination of Hoechst Roussel Vet with Intervet is a good move for both companies,” said Horst Waesche, the Hoechst AG Board of Management member responsible for Hoechst Roussel Vet. ”As part of Intervet, Hoechst Roussel Vet will have much better prospects for the future than as a stand-alone company or within Aventis, the new life sciences company being formed by Hoechst and Rhône-Poulenc.”

The transaction is subject to approval from the relevant regulatory authorities in Europe and the U.S.

Intervet, headquartered in Boxmeer, the Netherlands, with 1998 sales of some EUR 350 million, is focused on the research and development, manufacturing and marketing of veterinary products and is an active player in the worldwide veterinary medicine markets. Products include vaccines for the prevention of infectious diseases; antibiotics, and endocrine products for fertility management. All of these products are intended for use in a variety of animal species including poultry, pigs, cattle, sheep and goats, horses, fish and pets. Intervet operates globally with its own marketing organizations.

Hoechst is a group of international companies operating in the life sciences and industry. In 1998, the companies consolidated in the Hoechst Group had sales of around EUR 22.3 billion and employed approximately 97,000 people. By joining forces with Rhône-Poulenc, Hoechst plans to form Aventis, one of the world’s leading life science companies.

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings, chemicals and fibers. The company currently employs approximately 85,000 people in almost 70 countries. Consolidated sales for 1998 totaled EUR 12.5 billion (USD 13.8 billion). Financial results for the third quarter of 1999 will be announced on October 27.

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QUESTIONS AND ANSWERS

1. What is Intervet?

It is one of our most successful business units in the Pharma group, totally focussed on the veterinarian products. We have successfully grown this business to its present sales level of EUR 350 mln. This was achieved by internal growth, but also by a number of selective acquisitions. Intervet has a worldwide network of marketing, production and research facilities and it has an above-average track record of sales and earnings growth. Intervet is a world leader in veterinarian vaccines and fertility products. For further information see www.Intervet.com.

2. What is the strategy behind this acquisition?

It is our stated strategy to aspire leadership positions with structural and sustainable profitability and to give especially priority to growth of our Pharma operations. With this move Intervet (a typically high-performing Pharma business unit) is catapulted into the league of major players in this industry. Critical mass in this rapidly consolidating industry is key to ensure future growth potential.

3. What is the impact of this acquisition on Intervet?

*Product portfolio will be more balanced, enabling Intervet to offer a more complete range of products and services to the veterinary profession. Hoechst Roussel Vet will add amongst others antiparasitics, feed additives and antibacterials. See www.hoechstrousselvet.com for further information.

*Intervet is catapulted from no. 10 worldwide to no. 4, leading to increased critical mass and basis for innovative research.

*The geographical distribution will be strengthened, especially in the Americas.

*The increased marketing presence will lead to significant commercial top-line synergies.

4. Can you quantify synergies?

It mainly concerns commercial top-line synergies, amongst others caused by the add-on of products and the geographical expansion. We expect the benefits of the combination to be significant and Intervet to continue to turn in an above industry average growth of sales and profitability.

5. Will there be a change in headoffice/management structure of Intervet?

Toon Wilderbeek, currently general manager of Intervet, will manage the combination. It is too early for further comments and announcements as to management composition will be made in due time. However, given the enlargement of the operations, we will integrate the management of HRV as much as possible.

6. What consequences will the integration have for site policies and employment?

The acquisition is based on a scenario of expansion and increased market coverage, i.e. joining forces. In principle, the businesses are highly complementary, but of course, as usual we will look at efficiency measures were possible. Some organizational adaptations will naturally have to be made.

7. Do you expect any difficulties from the regulatory bodies?

Of course we have to notify such bodies. However, given the high level of complementarity we do not expect difficulties.

8. What is the timing of the closing?

Subject to regulatory approval, closing is expected in the fourth quarter of this year.

9. Can you give details on the consideration?

We will pay EUR 665 million (DEM 1,300 mln) for a debt-free/cash-free business. Payment will be in cash at closing.

10. How will you finance the acquisition?

We will finance this acquisition with debt and cash resources, amongst others making use of our commercial paper programs and other short-term debt instruments. Due to the recent divestments (PRC-DeSoto and Performance Films) we have been able to significantly reduce our debt since the Courtaulds acquisition.

11. What will be the effect on the financial ratios of Akzo Nobel?

After this acquisition, we will still have very sound financial ratios. Assuming that the intended divestment of Acordis will be completed in the near term, our year-end gearing will be in the 2 area, our internal minimum threshold. Interest coverage at the EBIT level will still be well above 5, our minimum target. EBITDA coverage will be higher than 8, also a comfortable figure.

12. What is the goodwill on this transaction; how will you account for it.

Goodwill is expected to be in the order of EUR 300 to 400 mln.

In accordance with our accounting policy goodwill is written-off against shareholders’ equity.

13. Will the deal be earnings and value enhancing?

The deal is earnings and value enhancing.

14. Is this a good transaction for the shareholders?

It is clearly in line with our strategy, it is earnings and value enhancing with a fair price.

15. Who were the banking advisors on the transaction?

Akzo Nobel was advised by Deutsche Bank. Hoechst AG was advised by J.P. Morgan.

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