Rhone-Poulenc To Split Chemicals And Pharmaceuticals?

8 September 1996

Management concern over shareholder value and the end of an asset displacement policy will move French company Rhone-Poulenc to finally decide to split into a chemicals company and a pharmaceutical company, according to Jean Borjeix, chief analyst at Jean-Pierre Pinatton, who feels such as move would boost share value by a third.

At the end of May, company managing director Igor Landau said that while the firm had been looking at a demerger of the pharmaceutical division, it has, for the time being, decided aginst such a move.

The company is worth no more than 40-45 billion French francs ($7.8-$8.9 billion), Mr Borjeix feels, because of the weight of underperforming chemical activities and their important debts. If a demerger is effected, total group value could be 60 billion francs. "An asset gain of such a size would allow (an investor) to wait until the (demerger) operation takes place," he said, noting that the 1998 and 1997 results forecasts limited the downside.

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