FRANKFURT, Germany (Reuters) — Aventis might soon confirm whether it is negotiating the sale of its CropScience business.
Germany’s Bayer AG, eager to secure a leading position in the concentrated farm chemicals market, is seen as frontrunner to buy the unit, but could sell its insecticide business to BASF AG to pre-empt anti-trust problems.
Adding CropScience to its existing business would bring Bayer close to global leader Syngenta, with annual sales of $10.1 billion — though losing insecticides would lop off $1.3 billion.
Aventis has been trying to sell CropScience so it can focus on faster-growing pharmaceuticals. This would be similar to what other chemical companies are doing.
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CropScience is the world’s third biggest farm chemicals operation with sales of $5 billion in 2000.
One person close to the company said Aventis aimed to make an announcement before the July 14 holiday in France to satisfy European Union regulations requiring it to consult workers ahead of any sale.
The statement is likely to contain few details on the sale, which is expected to value the business at $7.6-$10.1 billion, including debt. That price tag could be reduced by $378 million if liabilities relating to controversial genetically modified corn Starlink are excluded.
“At the top of the suggested range it would be a good price for Aventis. But Bayer and BASF will be buying strategic assets and their ability to strip out costs will be quite significant,” said one analyst in London.
Bayer has tried to bolster its agricultural business before, unsuccessfully bidding for DuPont Pharma and Cyanamid.
Analysts said building up farm chemicals makes sense for Bayer, whose conglomerate mix of businesses has been criticized by shareholders seeking more focused investments.
Agriculture was the most profitable of Bayer’s four divisions in 2000, with a 16 percent return on sales. Analysts have been advising it to expand its strongest units.
Bayer’s business is geared to insecticides, while the world market is more orientated to herbicides. Taking on CropScience’s herbicides and selling insecticides to BASF would help balance the portfolio.
According to a recent report, the worldwide agrochemicals market — estimated at around $50 billion in 1999 — will grow to $69.5 billion by 2010, by which time plant biotechnology will grow to a market of $30 billion.
“The focus in the future is on both traditional and plant biotech products in agrochemicals,” said Wiebke Schlenzka, who helped write the report.
