Bayer Finalizes Purchase Of Aventis CropScience; Conglomerate Seeks Partner From Europe to Boost Sales at Drug Division By Vanessa Fuhrmans
10/03/2001, The Wall Street Journal Page

Bayer AG's chief executive said the company would seek a European partner for its ailing pharmaceutical business as it wrapped up a deal to buy Aventis CropScience for 5.35 billion euros ($4.9 billion), plus the assumption of 1.9 billion euros in debt.

The search for a pharmaceutical partner follows Bayer's sudden withdrawal in August of its star anticholesterol drug, Baycol, after it was blamed for the death of more than 50 people. The company weighed selling its pharmaceutical business but instead decided to consider a majority-owned joint venture with another company to jump-start faltering sales.

Speaking on CNBC yesterday, Chief Executive Manfred Schneider said Bayer would look to Europe first for a strategic partner. "American pharmaceutical companies are too big for us," he said. Finding a smaller partner would "solve the problem [of growth] for both sides," he said.

Finding a partner with significant sales could prove difficult, though, especially if Bayer insists on keeping control of its drug business. Europe's major pharmaceutical companies, such as Roche Holding Ltd., are looking to expand, but have balked at ceding control to a partner and would prefer to acquire in the U.S., the world's most lucrative drug market.

The Aventis CropScience acquisition, meanwhile, is Bayer's largest to date and underscores its intent to expand in both drugs and chemicals. The purchase vaults it from seventh to second place among global agrochemical companies, behind Syngenta AG of Switzerland.

Bayer plans to finance the acquisition through additional borrowing, raising its net indebtedness to about 15 billion euros. That level will prevent Bayer from making further large acquisitions, said Bayer's finance chief, Werner Wenning.

Mr. Wenning said Bayer would step up cost-saving measures, cutting an additional 4,000 jobs as it merges Aventis CropScience with its own crop-protection business, and 1,250 more jobs at its pharmaceuticals division.

Aventis SA, which owns 76% of Aventis CropScience, is expected to reap roughly 3.8 billion euros from the sale, while Schering AG, which owns the remainder, will receive about 1.5 billion euros.


                     World Players
  Top agrochemical companies by 2000 sales, in millions of U.S. dollars
  Syngenta -- $6,796
  Bayer* (includes Aventis CropScience) -- $5,922
  Monsanto -- $5,175
  DuPont -- $3,939
  BASF -- $3,312
  Dow -- $2,782
  Sumitomo -- $774
  MAI -- $728
  FMC -- $660
  *Pro forma sales
  Source: the companies


  1. What is Bayer looking for in a partner?
  2. Does it make sense from a capital structure theory point of view to finance Aventis CropScience's acquisition with debt?  Explain.
  3. Can you explain Roche's desire to make an acquisition in the US, and contrast it with Bayer's European acquisitions strategy?
  4. If the price for the acquisition was a good one for Bayer, how could it simultaneously have been a good one for Schering and Aventis, SA?
  5. What is Bayer's debt-equity ratio?  Is that too high or too low for a pharmaceutical firm?  Is Bayer different from the average pharmaceutical firm?