Swiss drugs industry supplier Lonza is to buy U.S.-listed Arch Chemicals for some $1.2 billion, creating the world's largest player in the microbial control market, the groups said on Monday.
Lonza will pay $47.20 per share for Arch Chemicals in cash, a premium of 36.7 percent to the U.S. group's average closing price over the last 30 trading days, and the bid has the unanimous backing of Arch Chemical's board.
The move will boost Lonza's life science unit, help protect the Swiss group against the impact of the strong Swiss franc, and make it the market leader in the rather fragmented microbial control market, which is currently valued at around $10 billion and is growing at some 4 to 6 percent per year.
Lonza is eyeing cost synergies of at least $50 million per year by the second year and the deal is expected to be earnings per share accretive in the first year, the groups said.
Based on the offer price for all the outstanding shares, Arch Chemicals' enterprise value would be around $1.4 billion.
Arch Chemicals had sales of around $1.4 billion in 2010. Lonza, which will finance the deal through debt, is expecting to complete the buy before the end of 2011.
At 0719 GMT, shares in Lonza were trading 0.6 percent lower, in line with the Swiss market, but underperforming the European healthcare index as some investors said the price was high, while it could be dilutive to Lonza's business model.
The deal will also boost Lonza's business in China, India, Brazil and South Africa, Lonza said.
Microbial control involves destroying microorganisms, which carry disease.
This is particularly important in hospitals as hospital-acquired infections are one of the leading causes of death of patients.
It is also used to prevent the spread of infection in places like swimming pools, as well as to ensure that wood is free of mold and algae — a major concern for this industry.
Lonza Chief Executive Stefan Borgas said the group was unlikely to go for any larger acquisitions in the wake of this deal, but he said the group was still on the prowl for bolt-on buys.