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February 13, 2006
Volume 84, Number 7
p. 13

European Industry

Breakup Planned For Akzo Nobel

Dutch firm to split off pharma unit, leaving chemicals and coatings

Patricia Short

Akzo Nobel Photos

Following three years of restructuring, Akzo Nobel is planning to split its pharmaceutical operations into a separate company.

The Dutch company is preparing an initial public offering to sell a minority stake, the percentage still to be determined, in a new firm called Organon Biosciences. Akzo Nobel itself will remain a coatings and chemicals company.

Toon Wilderbeek, Akzo Nobel's board director for pharmaceuticals, will be the CEO of the new drug company. It will include human pharmaceuticals, veterinary products, fine chemicals synthesis operations, and vaccines. These operations had combined sales in 2005 of $4.4 billion, 27% of Akzo Nobel's total sales of $16.2 billion.

The exact timing of the IPO will depend on development of the division's drug pipeline and on general stock market conditions. Akzo plans to sell the remaining shares within the following two to three years.

"After a lot of thought, we have decided that this is the right time to create the two companies," Hans Wijers, Akzo Nobel CEO, said at the company's annual results press conference in Amsterdam last week.

Wijers' mantra for the past several years has been "fix pharma." Restoring the underachieving division to strength, he conceded, "has taken a lot of time. But we now see the first results of that work: Growth is coming back, cost levels are significantly down, and our pipeline is filled." The company also has accelerated its biotechnology activities with the opening of a new lab in Cambridge, Mass. "We are now in a position of strength," he said.

Although Organon Biosciences will be a medium-sized company, Wijers is optimistic about its chances for success. "We are convinced that the future of the pharmaceutical industry will not be just large pharma companies," he said. Organon, he argued, will debut with a full pipeline, an established base worldwide, and well-proven biotech products and technology. It will also have a strong animal health position and a growing vaccines business.

Meanwhile, the coatings and chemicals operations-43% and 30% of Akzo Nobel's sales, respectively-are in strong positions, according to Leif E. Darner, a member of the board responsible for chemicals.

A major strategic review of chemicals over the past 18 months has pruned the business to five areas, he said, all of above-average financial performance. The five are pulp and paper chemicals; polymer chemicals, primarily organic peroxides; industrial and specialty surfactants; functional specialty chemicals; and base chemicals.

In coatings, Darner said, Akzo is the number one producer worldwide, with strong internal growth topped up by selected acquisitions. China is an area of particular focus, he said, and is now the country with the largest number of coatings division employees.

Akzo Nobel has long been pressured by stock analysts to split itself up. Their pleasure at the announcement came quickly, as the company's share price rose 6.4% on the Amsterdam Stock Exchange the morning of the announcement.

The decision leaves Solvay and Germany's Merck as the last two major chemical and pharmaceutical hybrids in Europe. It remains to be seen how long they can maintain their structures as the financial community turns its attention to them.

Chemical & Engineering News
ISSN 0009-2347
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