Akzo's Organon sold for $14 Billion

Schering-Plough Corp. agreed to buy Akzo Nobel NV's drugs unit Organon for $14.4 billion in cash to gain birth-control pills and experimental medicines.

The drugmaker expects to save $500 million annually from the acquisition after the first three years, the Kenilworth, New Jersey-based company said in a PRNewswire statement today. Organon makes the contraceptives Implanon and Marvelon and the sale includes the world's largest maker of animal vaccines.

Chief Executive Officer Fred Hassan said the purchase brings five experimental drugs in advanced clinical tests and ``a number of promising projects'' in earlier stages of research. Akzo shares soared to the highest level in five years.

``It's a fantastic price,'' said Wim Hoste, an analyst at KBC Securities in Brussels. Hoste said he plans to raise his recommendation on Akzo to ``buy'' from ``accumulate'' and lift his price estimate to 60 euros from 48 euros.

Six analysts surveyed by Bloomberg News had estimated Organon would sell for about 8 billion euros ($10.5 billion).

``It's a day of celebration for Akzo shareholders,'' said Tom Muller, an analyst at Theodoor Gilissen in Amsterdam.

Akzo shares rose 7.59 euros, or 16 percent, to 54 euros at 9:20 a.m. in Amsterdam. Schering-Plough shares closed at $23.85 in New York on Friday.

Akzo was expected to publish details of a plan to sell Organon shares today. Instead, this morning, the board signed the agreement with Schering-Plough. Talks began one and a half weeks ago, Chief Executive Hans Wijers told reporters on a conference call.

Seeking Acquisitions

Hassan said last month he was seeking to buy other companies and secure licensing deals on new compounds to boost the company's pipeline of new drugs.

Schering-Plough this year acquired a nail fungus drug developed by Anacor Pharmaceuticals Inc. for as much as $615 million, and will pay Alk-Abello A/S as much as $290 million for its experimental allergy treatments. Hassan has said the company may end up this year with about half its new products coming from outside sources.

The acquisition ``builds on our growing strength in primary care, giving us immediate access to central nervous system and women's health care products,'' Hassan said today in the statement. It also ``fills a gap in our late-stage pipeline.''

The transaction will boost Schering-Plough's earnings per share by about 10 cents in the first year and close before the end of 2007, the U.S. drugmaker said.

Akzo, the largest Dutch chemical maker, is selling Organon after sales grew by about half the industry average and the company suffered setbacks with experimental medicines such as the schizophrenia treatment asenapine.

Pfizer Walks Away

Akzo was among the last European companies with drugs and chemicals after competitors such as AstraZeneca Plc and Novartis AG split operations since 2000. Investors and analysts began saying Akzo might opt for a direct sale, rather than an initial offering, in October after asenapine showed mixed results on schizophrenics.

In November, Pfizer Inc. dropped out of an agreement to help develop the schizophrenia treatment with Akzo, removing one hurdle to such a sale. The two drugmakers' contract had allowed Pfizer to get the rights to the medicine if Organon changed ownership.

Organon was founded in 1923, after Saal van Zwanenberg started to produce insulin from the pancreas of animals. Its sales fell in 2003 and 2004 as the unit struggled with the patent loss for its Remeron antidepressant. Revenue climbed 3 percent in 2005, about half the industry average, helped by the fertility treatment Puregon. It rose 10 percent in the first nine months of 2006.

Organon and the animal health unit Intervet brought in 3.52 billion euros in revenue in 2005, about a third of that of the chemicals and coatings units. Akzo's remaining units make Sikkens brand paints, coatings for Amtrak's Acela train, chemicals to bleach pulp and compounds used in the solar cells that fuel orbiting satellites.

source:www.bloomberg.com