Basel, Switzerland
December 2, 1999
The Boards of Novartis AG (Novartis) and AstraZeneca PLC (AstraZeneca) announce that they
each have unanimously agreed to spin off and merge Novartis Crop Protection and Seed
businesses and Zeneca Agrochemicals (the "Transaction'') to create the world's first
dedicated
agribusiness company with combined sales in 1998 of USD 7.9 billion. The new company will
be
named Syngenta AG ("Syngenta''), headquartered in Basel,
Switzerland, and will be listed on the
Swiss, London, New York and Stockholm Stock Exchanges. Novartis shareholders will receive
61% of the shares of Syngenta and AstraZeneca shareholders will receive 39% of the shares
of
Syngenta. Novartis' Animal Health business and AstraZeneca's 50% holding in Advanta are
not
included in the Transaction.
Heinz Imhof, currently Head of Novartis Agribusiness, will become Chairman of Syngenta.
Michael Pragnell, presently CEO of Zeneca Agrochemicals, will be CEO.
Novartis and AstraZeneca have entered into a binding agreement to create Syngenta. The
Transaction is conditional, inter alia, on the shareholder approvals of Novartis and
AstraZeneca and receipt of relevant regulatory clearances. Completion and the listings of
Syngenta are expected to take place in the second half of 2000.
Strategic Rationale: Focus and Growth
After a thorough review of its business portfolio strategy the Board of Novartis concluded
that the
benefits of concentrating on the healthcare businesses outweigh the modest synergies
between the Healthcare and Agribusiness activities. Novartis considered various options
for the divestment of its Agribusiness. It was determined that merging its Crop Protection
and Seeds businesses with AstraZeneca's Agrochemicals as the partner of choice is an
exceptional solution for the long-term development of these activities. Syngenta will be a
new worldwide leader in agribusiness and provide a unique platform for sustained earnings
growth.
The formation of Syngenta will unlock significant value for Novartis shareholders based on
the
excellent complementarity and synergies of the merged businesses as well as Novartis' new
focus on healthcare.
Novartis Chairman and CEO, Dr. Daniel Vasella, commented: "The launch of Syngenta
creates the first global dedicated agribusiness company, a leader in its industry that
will be well positioned for profitable growth. This transaction is part of Novartis'
strategy to focus on its Healthcare business portfolio. We have an outstanding outlook
based on our rich and promising pipeline and our strong technology platform.''
Novartis will further strengthen its management and commercial capabilities in
Pharmaceuticals,
naming Thomas Ebeling as Chief Operating Officer reporting to Dr. Jerry Karabelas. Al
Piergallini,
currently Head of Novartis Consumer Health in North America, will succeed Mr. Ebeling as
Head
of Consumer Health worldwide to insure a continuation of the division's dynamic growth.
Unparalleled Global Marketing Capability across Crops and Regions
Heinz Imhof, Chairman designate of Syngenta, commented, "The creation of Syngenta
marks the
most exciting milestone in the history of both businesses. The combination will allow us
to create a leading high performance company with an excellent competitive position,
providing the base for a sustainable increase in shareholder value.'' Michael Pragnell,
CEO designate of Syngenta, said, "The Agribusiness of Novartis and Zeneca
Agrochemicals are an ideal fit with complementary product portfolios and a strong
international sales and marketing culture. Syngenta's unique focus and its outstanding
science base will enable it to enhance value creation in agriculture at a time of
substantial industry change.''
The development of the new company will be based on the combination of the largest global
sales
and service networks with the broadest and most attractive product portfolio in crop
protection and
a leading position in seeds. Syngenta will build on the most profitable crop segments to
create and capture increased value in the agribusiness food chain through accelerated
innovation, to meet the needs of growers, processors and consumers.
Global Presence
Based on combined sales of USD 7.9 billion in 1998, Syngenta will be ranked as No. 1 in
all major regions and will have a presence in over 100 countries. Combined 1998 sales were
USD 2.9 billion in NAFTA, USD 2.9 billion in Europe, USD 1.1 billion in Latin America, USD
0.8 billion in
Asia/Pacific and USD 0.3 billion for the rest of the world.
Broad Product Line
Syngenta will be the first global "pure play'' agribusiness company. Based on 1998
combined sales, the new company would rank No. 1 in the crop protection market with
leading positions in
herbicides, fungicides, insecticides, seed treatments, and a No. 3 position in seeds. Crop
Protection will contribute USD 6.9 billion (87% of the business) and Seeds approximately
USD 1.0 billion (13% of the business).
In Crop Protection, combined 1998 sales by major market segments were USD 3.5 billion in
herbicides, USD 1.7 billion in fungicides, USD 1.2 billion in insecticides and USD 0.6
billion in seed treatments and others. The Crop Protection products include: the selective
herbicides Bicep
Magnum®, Dual Magnum®, Fusilade®, Surpass® and Topik®, the non-selective herbicides
Gramoxone® and Touchdown®, the fungicides Amistar®, Bravo®, Ridomil Gold®, Score®
and
Tilt®, the insecticides Curacron®, Force®, Karate®, and Vertimec®, and the seed
treatment
products Celest® and Maxim®.
The launches of several new products, such as the fungicide Flint®, the insecticide
Actara® (which is also marketed as the seed treatment product Cruiser®) are currently
underway in major markets. Additionally a number of late-stage-development crop protection
products, including the new corn herbicide mesotrione ZA 1296, are scheduled for launch in
the coming three years.
In seeds, 1998 sales were approximately USD 1.0
billion. Syngenta will have leading brands in
several crops including NK® Corn, NK® Soybeans, NK® Sunflowers, Hilleshoeg® Sugarbeet,
S&G® Vegetables, S&G® Flowers and Rogers® Vegetables.
Outstanding R&D Platform to Lead Innovation in a Rapidly Changing Industry
With a combined 1998 R&D investment of approximately USD 700 million, Syngenta will
have a
strong innovation platform in chemistry and plant biotechnology with the leading team of
scientists in the industry and the potential to exploit new economies of scale. These
innovative capabilities will include dynamic programs in invention, synthesis, screening,
breeding, gene technology and genomics. These new technologies are critical as
agribusiness goes through a period of substantial change.
Tomorrow's products will increasingly be centred on crop input and output traits as well
as
advanced crop protection chemicals. Syngenta's discovery activities will contribute to the
development of high-value products, that will enhance the production of safe, healthy and
high
quality foods, feed, plants and plant derivatives. Major international research centres
are in
Berkshire UK, Leiden NL, Richmond and La Jolla in California, Research Triangle Park in
North
Carolina, and Basel and Stein in Switzerland.
Significant Merger Related Net Cost Savings of USD 525 Million Pre-tax by the
Third Year of Completion of the Merger
Syngenta management expects that the merger will generate net annual pre-tax cost savings
of
approximately USD 525 million per year. Around 40% of the total savings are expected to
come
from a rationalisation of selling, general and administrative expenses, with the balance
from
leveraging the combined R&D platform, as well as rationalisation of manufacturing,
supply and
distribution. It is planned that 30% of the total cost savings will be achieved within 12
months, 70% within 24 months and 100% within in 36 months from completion. The cash
restructuring charges associated with the USD 525 million savings are estimated to be USD
850 million including USD 100 million for completing the merger. These costs will be borne
by Syngenta. The amount of asset write-offs has yet to be determined.
Management's estimates of the cost savings include a reduction of approximately 3000 in
the
combined worldwide Crop Protection employee base. All changes will be implemented in a
socially responsible manner over three years following completion.
The net cost savings of USD 525 million are additional to the cost saving programs already
announced since mid year by both companies, which will continue as planned, and are
expected to lead to USD 100 million in annual cost savings. The costs of achieving these
previously announced programs will be borne by the respective parent companies.
The cost savings will enable an organizational structure to free up resources for value
creating
activities.
Key Financials
The published accounts of Syngenta will be prepared in US dollars in accordance with
International Accounting Standards (IAS) and with US GAAP reconciliation. The combination
is expected to be purchase accounted as an acquisition of Zeneca Agrochemicals by Novartis
Agribusiness.
For the financial year ending 31 December 1998, the combined sales of Syngenta were USD
7.9
billion and combined EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization)
was
USD 1.6 billion. Combined Research & Development investment in the same period was
approximately USD 700 million.
Summary financial information on Novartis' Agribusiness and AstraZeneca's agrochemicals
business is set out in Appendices 2 and 3. The total combined number of employees at the
end of 1998 was approximately 23 500 with 19 200 in Crop Protection and 4300 in Seeds.
Positioning in Capital Markets
Syngenta shares will be listed on the Swiss, London, New York and Stockholm Stock
Exchanges and it is expected that Syngenta will be included in the Swiss and Swedish
indices.
Syngenta is targeting an optimal capital structure that will enable a solid investment
grade rating.
Third party funding is targeted at a total of approximately USD 3.5-4.0 billion, and will
enable
Syngenta, as it judges appropriate, to undertake a repurchase program of up to 10% of its
shares in the period shortly following completion and to refinance parental debt.
The future dividend policy of Syngenta will be developed by the Board of Syngenta and will
be
communicated to shareholders at the appropriate time.
Corporate Governance
Heinz Imhof will be Chairman of the Board, which will consist of 12 members, of which 6
have been nominated by Novartis and 6 by AstraZeneca.
The Executive Committee will be an 8-person management team, including 4 from Novartis and
4
from AstraZeneca. Michael Pragnell will assume the post of CEO, while COO Crop Protection
will
be John Atkin (N) and COO Seeds Jeff Beard (N). Chemical Operations & Global Supply
will be
headed by Bruce Bissell (AZ), Research & Technology by David Evans (AZ), Planning
& Business Development by David Jones (AZ) and Legal & Taxes by Christoph Mader
(N). Richard Steiblin (N) will become CFO.
Syngenta's corporate governance principles will be consistent with the requirements and
best
practice of the major capital markets where it will be listed.
Terms of the Transaction
In a first step, Novartis will spin off its Crop Protection and Seeds Sectors and
AstraZeneca its
agrochemicals business. Immediately following, these businesses will be merged to form
Syngenta. Further details of the Transaction process and the Master Agreement are given in
Appendix 1.
In the exchange of shares, Novartis shareholders will receive 61% and AstraZeneca
shareholders
will receive approximately 39% of the shares of the new company.
Based on the current number of Novartis and AstraZeneca shares, Syngenta will have
approximately 111.7 million registered shares. Shareholders of Novartis will be offered 1
share of Syngenta at a price of CHF 10 for each share of Novartis and AstraZeneca's
shareholders will receive 1 share of Syngenta for approximately every 40.83 shares of
AstraZeneca held. The final exchange ratio between AstraZeneca and Syngenta shares will be
determined at the time of completion of the transaction. Fractional entitlements to shares
of Syngenta will not be issued to AstraZeneca shareholders as part of the distribution.
Arrangements will be made for them to receive cash for such fractional interests in pounds
sterling, US dollars or Swedish kronor.
Timetable and Other Matters
The transaction is expected to be completed after all necessary shareholder and regulatory
approvals have been received. Circulars setting out details of the proposed transaction
and
documentation in relation to the proposed listings of Syngenta will be sent to Novartis
and
AstraZeneca shareholders in due course. The shareholder meeting for Novartis will take
place on 12 April 2000 and AstraZeneca's on 26 May 2000.
Subject to receiving the necessary clearances and shareholder and other approvals, it is
anticipated that the Transaction will be completed in the second half of 2000.
Should actions be required by the regulatory authorities, any proceeds would be retained
within
Syngenta with no adjustment to the terms agreed between Novartis and AstraZeneca.
The Boards of Directors of Novartis and AstraZeneca have approved the proposed Transaction
and have been advised by Morgan Stanley Dean Witter (acting for Novartis) and CSFB and
Goldman Sachs (acting for AstraZeneca) that the proposed Transaction is fair from a
financial point of view to Novartis shareholders and AstraZeneca shareholders,
respectively.
Statements made in this press release that state "we will,'' "we expect,'' or
otherwise state the
companies' predictions for the future are forward-looking statements. Actual results might
differ
materially from those projected in the forward-looking statements.This news release contains forward-looking statements that involve
known and unknown risks, uncertainties and other factors that may cause the actual results
to be materially different from any future results, performance, or achievements expressed
or implied by such statements, in particular, management's expectations regarding future
research an development results could be affected by, among others things, unexpected
regulatory delays or government regulation generally; uncertainties relating to clinical
trials and product development; the introduction of competitive products for the same or
similar indications; changes in global economic or demographic trends; increased
governmental pricing pressures; the company's ability to obtain or maintain patent and
other proprietary intellectual property protection; and competition generally.
Syngenta does not and will not exist until regulatory approvals have been granted.
Company news release
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