Engineering News

Lonza buys Cambrex biotech units, raises guidance
Tue Oct 24, 2006 6:49am ET

ZURICH/NEW YORK, Oct 24 (Reuters) - Swiss chemicals group Lonza on Tuesday scooped up two units from drug firm Cambrex Corp., raising its outlook as it strengthens its high-margin biopharmaceutical business.

Lonza shares rose 6 percent to 95.50 Swiss francs by 0941 GMT -- their highest level in four years -- as analysts welcomed the outlook for higher earnings and the group's shift away from its traditional products used to make plastics.

Lonza, which will pay $460 million in cash for the two units, said life sciences would make up close to 90 percent of its total sales after the deal and the flotation of its Polynt SpA polymers unit in Milan, due later this week.

"These acquisitions and the IPO of Polynt accelerate the delivery of Lonza's strategic shift towards life sciences that we mapped out two years ago," Chief Executive Officer Stefan Borgas said in a statement.

The group raised its forecast for sales growth to 8 to 12 percent per year and for operating growth to the mid-to-high teens range per year. The acquisitions would add to earnings per share as of 2008, Lonza said.

Analysts said the acquisition would enable Lonza to sell more sophisticated products to drugmakers, who are spending an increasing share of their research budget at firms supplying the basic ingredients they use in their laboratories.

"They are complementing their life sciences business in a sensible way ... The investor has been waiting for that message for a long time and is now reacting positively," said Nina Baiker, an analyst at Zuercher Kantonalbank.

Cambrex said in a statement that it expected to realise net proceeds, after taxes and transaction-related costs, of about $450 million, which would be used to repay all outstanding debt and help fund a special dividend to stockholders.

"Cambrex expects the special dividend to be approximately $13.50 to $14.50 per share," it said in a statement.

Cambrex CEO James Mack said that following a strategic review the company would cut costs and focus on its so-called human health division, which makes various pharmaceutical ingredients and intermediates.


Analysts had long expected Lonza to raise its forecasts as it focuses on its core pharmaceutical and biotech businesses and aims this week to list a majority stake in its Polynt unit in Italy in a bid to increase overall profitability.

Lonza said it would use all of the proceeds from the listing for the present acquisition. It expects to sell 60 to 80 percent of the unit, which it values at between 350 million and 430 million Swiss francs ($276.5 million and $339.6 million).

"All proceeds of the IPO (will be used) directly for the acquisition, but the proceeds will make up approximately a third of the financing needs," Stefan Borgas said on a conference call. The rest of the deal would be financed by debt.

The company said it expected integration costs from the acquisition of $25 million to $30 million.

Borgas also said the company had "a few other ideas" for further acquisitions. But any future purchases would be smaller, and the group's main focus would now be on integrating the new units, once the deal was finalised in 2007.

Source: Reuters

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