Akzo makes U-turn on Organon, selling the unit to Schering-Plough for $14.4B

Dutch chemicals and pharmaceutical group Akzo Nobel has done a volte face with regard to its human and veterinary medicines business, Organon Biosciences NV (OBS). On March 12, the day that it was due to launch an Initial Public Offering for around a third of the unit (Marketletter February 26), the firm revealed that it had received, and accepted, a takeover bid worth 11.0 billion euros ($14.4 billion) in cash for the business from US drug major Schering-Plough.

The offer price is significantly higher than the 8.0-9.0 billion euros or so at which the IPO (which was expected to generate around 2.5 billion euros) would have valued the whole of OBS, and saw Akzo Nobel's share price leap 19% to 55.01 euros in early trading on the day of the announcement. The bid is nearly three times the sales generated by the unit last year and 14.8 times 2006 earnings before interest, tax, depreciation and amortization. S-P's shares rose 0.6% to $24.00 when the New York market opened, having risen nearly 6% on the news in Germany, where the stock is also traded.

The transaction is expected to be completed in the second half of this year and accretive to S-P's earnings per share of about $0.10 in the first full year and to achieve synergies of around $500.0 million a year, although this will not be achieved until around three years time, according to a statement from S-P.