IHS Chemical Week


Arch’s Pursuit of Biocides Sparked Lonza Takeover Bid

3:08 PM MDT | July 19, 2011 | By ROB WESTERVELT

Discussions initiated by Arch Chemicals regarding the potential acquisition of Lonza’s biocides business led instead to Lonza’s proposed $1.4-billion takeover of Arch. Details of how the transaction developed were included in a tender offer filing by Lonza with U.S. securities regulators. Lonza launched its $47.20/share bid for Arch on July 15.

Arch and Lonza had periodic contact about commercial collaborations in biocides over the past two years, according to the filings. Discussions were not initially focused on a strategic deal, but rather on potential product innovation and development opportunities between the parties, the filing says.

Arch expressed interest in a potential acquisition of Lonza’s biocides business at separate meetings in June 2010 and November of 2010, but Lonza said it was not considering a divestiture, according to the filings.

Arch then requested a meeting in Basel between Lonza president and CEO Stefan Borgas and Arch’s chairman and CEO Michael Campbell, held March 11. Campbell re-emphasized Arch’s interest in Lonza’s biocides business at the meeting and asked whether there was a price at which the business would be available for sale, according to the filing. Borgas responded that Lonza was not considering an outright sale of the business, but proposed an alternate structure in which Lonza and Arch would combine their biocides businesses in exchange for a “significant stake” in Arch.

On April 26, Borgas raised with Campbell the prospect of an outright acquisition of Arch, following a previous discussion in which he noted that Lonza’s board was concerned about the prospects of a minority investment in Arch, On May 23, Borgas told Campbell that Lonza would consider an acquisition at $43-$45/share. Campbell told Borgas would take the offer to Arch’s board but noted he did not think the price range reflected the value of Arch.

Negotiations continued, and on June 21 Lonza delivered a “best and final” offer of $47.20/share to Arch. Both companies then worked together to complete a final acquisition agreement as Lonza continued due diligence. Arch’s board approved the deal, at $47.20/share, on Friday, July 8, and both companies announced the deal on Monday, July 11.

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