News

Solvay Sells Drugs Unit to Abbott for €4.5 Billion

11.12.2009 -

Belgian drugs, chemicals and plastics maker Solvay said it would sell its drugs unit to U.S. partner Abbott Laboratories for €4.5 billion ($6.6 billion) in cash and reinvest in chemicals and plastics. Abbott had agreed to buy the unit to bolster its flagging prescription drug business by giving it a number of new medicines in late stages of testing, sources familiar with the deal said.
"We are building a new refocused group with the financial means to further accelerate sustainable growth," Solvay's board chairman Alois Michielsen said. The enterprise value of the deal is €5.2 billion, including 4.5 billion in cash, additional potential milestone payments of up to €300 million between 2011 and 2013 and liabilities of about €400 million. "In anticipation of future market needs, we are ensuring we have the technologies, products, infrastructure and reach," Abbott Chief Executive Miles White said. Abbott said the deal will add $0.10 to ongoing earnings per share in 2010, doubling to more than $0.20 by 2012 and increasing thereafter, all before one-time transaction-related items expected to occur in 2010 - 2012. Abbott said it would fund the deal with available cash.
Solvay said the proceeds from the deal will be reinvested in external and organic growth in strategic projects in chemicals and plastics with a sharp focus on long-term value creation. Studies about such reinvestments are ongoing, it added. "What is important is that we have the cash in house. What we will aim at is reinvesting in activities securing a sustainable growth," Solvay Chief Executive Christian Jourquin told reporters. He added that Solvay's drugs unit had provided the firm with low cyclicality, less exposure to energy costs and high-added value and that this would be the criteria that would guide Solvay's reinvestment policy. "We consider the change in the business model for pharma will considerably change the size and structure of the business, so what is important is to know when you have to exit a business," Jourquin said.
The deal also includes Solvay's vaccines business. Solvay's Dutch cell-based flu vaccine production facility - which can produce both seasonal and pandemic influenza vaccines - was validated earlier this month after a final inspection by Dutch authorities. The transaction is expected to be closed in the first quarter of 2010, pending approval by competition authorities and Solvay said it would communicate the impact of the deal on its results when finalized.