Bayer Agrees to Buy Roche Unit for $3 Billion
Bayer, the maker of Alka-Seltzer stomach remedies and inventor of aspirin, agreed to buy Roche Holding’s nonprescription healthcare unit for $3 billion as its main drug business lags behind competitors such as Pfizer Inc. and Novartis.
The expanded division would have about 5% of the over-the-counter drug market, Leverkusen, Germany-based Bayer said Monday. Germany’s No. 2 drug and chemical maker also would gain full control of the U.S. joint venture it had with Roche, and the Rennie antacid and Berocca vitamins.
Bayer Chief Executive Werner Wenning expects to double sales in the unit and break into the top four makers of over-the-counter treatments from No. 8 to compete with Pfizer, GlaxoSmithKline and Johnson & Johnson. His drug business is struggling, having lost the patent for the antibiotic Cipro, which made up about a quarter of the unit’s sales last year. It also recalled the cholesterol medicine Baycol in 2001.
The purchase “gives Bayer a stronger business with better geographical balance,” said Frank Joachim, who advises on chemical investments at HSBC Trinkaus Capital Management in Dusseldorf, which has more than $43 billion under management, including Bayer shares. Shares of Bayer fell 44 cents to $27.16 on the New York Stock Exchange, while shares of Basel, Switzerland-based Roche fell 0.8% in Zurich.
Roche, Switzerland’s second-largest drug maker, is exiting from the business to focus on more-profitable prescription medicines and diagnostics.
The companies already market the Aleve painkiller together.
Bayer’s nonprescription sales fell 18% last year, partly after it sold household insecticides, which were part of the unit. Bayer is seeking to benefit as governments cut drug costs.
Separately, Bayer said that it was in “advanced” talks to sell its plasma business, and that it expected an agreement by the end of this year, potentially this quarter.
Bayer said the Roche unit would add to earnings from 2006. The purchase won’t change this year’s earnings goals, Wenning said on a conference call. Bayer declined to detail profit targets or job cuts.
