Swiss pharmaceuticals group Roche Holding Ltd announced yesterday it had agreed to buy diagnostics and pharmaceuticals company Boehringer Mannheim Group and a leading orthopedics products company, DePuy , in a deal valued at $11 billion.
Roche said in a statement that the agreement calls for it to purchase all the shares of Bermuda-based Corange Ltd, the sole owner of the diagnostics and pharmaceuticals business of Boehringer Mannheim Group.
Corange also holds 84.2 per cent of shares in DePuy Inc a a Delaware-based maker of artifical joints and orthopedic products with sales of 860 million francs ($615 million) and 2,900 employees.
The deal strengthens Roches diagostic side much more than its pharma business.
But it was not too surprising to analysts who say that a consolidation trend in the pharmaceuticals industry is focused on achieving so-called critical mass in an attempt to survive as major as competitor in the next century.
Analysts have predicted that early in the next century the top 10 pharmaceutical companies might have global market shares of between five and 10 per cent, compared with between two and four per cent now. Roche currently has about 2.7 per cent. Market leaders Glaxo Wellcome and Novartis are just under five per cent.
News of the Roche acquisition also comes after months of persistent rumours that Roche, a cash rich group and one of the most profitable in the industry, was shopping for a major acquisition.
The merger of the Roche and Boehringer diagnostics businesses will create the world leader in diagnostics with sales of 3.5 billion francs and 13,500 employees.
It will also be a world leader in terms of product portfolio, technological competence and geographical presence, Roche said in its statement.
It also said the acquisition of Boehringers pharmaceuticals business, which had 1996 sales of 1.5 billion francs, will increase the Roche global market share in pharmaceuticals to 3.3.
DePuy, a company with sales of 860 million francs and 2,900 employees, is a world leader artifical joints and orthopedic products.
The acquisition must still be approved by the relevant regulatory authorities, Roche said in its statement.
This acquisition enables Roche to attain yet another of its strategic goals, to become a leader in the diagnostics systems and products sector in terms of sales and profitability, Roche chairman Fritz Gerber said in the statement.
Pharmaceutical sector analysts said the quality of the acquisition was apparently good. The fit in diagnostics is superb, said Credit Suisse First Boston analyst Genghis Lloyd-Harris.
But the analysts were keen for information needed to access the financial impact on Roche.
Open questions were about financing, and more detail on the synergies expected from the acquisition of the Boehringer pharmaceutical portfolio, UBS analyst Birgit Kulhoff said.
She said the purchase price was probably equivalent to an earnings multiple of about 25, but this was based on a very preliminary analysis. This is not exactly the cheapest deal, she added.
Separately, Roche said in its statements that the not prevent it from pursuing objectives set at the beginning of the year, particularly the launch a new cardiovascular agent called Posicor, Posicor, an anti-obesity product named Xenical and a Parkinsons disease treatment called Tasmar.
