Lonza finalises deal to buy Arch Chemicals

By Alexandria Pesic

- Last updated on GMT

Related tags Biotechnology

Multinational biotech giant, Lonza, has completed the acquisition of US-based Arch Chemicals as the company bids to tap into the microbial control sector.

Basel, Switzerland-based Lonza paid a total of $1.4bn for Arch - amounting to a cash value of $47.20 per share - in the hope of reducing it's dependency on the "volatile biopharmaceutical contract manufacturing market.” The deal makes Lonza the world's leading microbial control business, with combined sales figures of $1.6bn for 2010.

Following on from the deal Lonza said it would increase investment in research and development (R&D) projects, as well as developing products across newly-formed Arch Lonza's portfolio for customers in both established and emerging markets, such as Brazil, Russia, India and China.

"After having built the world's leading pharmaceutical contract manufacturer over the past years, we are now the world's leading microbial control business,"​ said Lonza CEO Stefan Borgas.

"This step enhances our global footprint, balances our currencies and our business models. We have the willingness and the resources to invest in R&D and applications development for the benefit of all of our customers,"​ he added.

Growth market

Prior to Lonza's buyout, Arch Chemicals' main business was in biocides - chemicals that kill or block the growth of harmful micro-organisms in water, wood, industrial applications and personal care products.

The biocides market is worth an estimated $10bn globally, with a growth rate of more than six per cent year on year, proving an attractive sector for Lonza at a time when slow product approval rates, overcapacity in in-house manufacturing facilities, and cost-cutting by drugmakers are hampering the growth of its contract manufacturing services.

But no doubt of equal interest to Lonza when contemplating the deal is Arch Chemicals' expertise in the production of hydrazine - a highly reactive difunctional molecule used as a building block in the organic synthesis of certain pharmaceuticals – which tallies well with the Swiss company's pharmaceutical operations.

Michael Campbell, chairman and CEO of Lonza, called the deal 'compelling' ​and said the obvious synergy between the two companies played a large part in bringing it about.

We are pleased to have reached this agreement with Lonza, a company that knows our business well and shares our commitment to continuous improvement,” ​he said.

Lonza said it anticipates the deal will result in a one-off payment of $85m in order to fully integrate the two companies.

News of the agreement follows a turbulent time in the marketplace for Lonza, which posted disappointing overall sales figures for 2010. However its own small microbial control products posted "high growth".

Related topics Contract Manufacturing & Logistics

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