Zeneca-Astra merger unlikely to impact domestic operations

Mumbai/London, Dec 9: Sweden's Astra AB and Britain's Zeneca Group Plc said on Wednesday that they would merge to create a leading player...

Mumbai/London, Dec 9: Sweden’s Astra AB and Britain’s Zeneca Group Plc said on Wednesday that they would merge to create a leading player in the drug industry. The two companies said in a joint statement that yearly cost savings would total $1.1 billion within three years.

"The boards of Astra and Zeneca announce that they have unanimously agreed the terms of an all-share merger of equals to form AstraZeneca," the two companies said in a joint statement. Percy Barnevik has been nominated chairman, Zeneca’s Tom McKillop chief executive and David Barnes and Astra’s Hakan Mogren will be deputy chairmen in the new group. The board of directors will be drawn equally from Astra and Zeneca.

The announcement to join forces in Europe’s largest-ever merger is unlikely to have major ramifications in India. This, analysts say, is essentially because of Astra’s intent to exit from the Bangalore-based pharmaceutical company Astra IDL. The venture is jointly controlled by the Swiss multinational and the IDL group of theHindujas. Both partners hold 25.75 each of the company’s equity and IDL, which has the first right of refusal, is believed to have evinced an interest in taking total control of the company. Astra IDL officials were unavailable for comment.

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Astra had, earlier this year, in a communication to the Securities and Exchange Board of India, disclosed its intent to withdraw from Astra IDL in a phased manner. The Swiss firm also plans to reassign its trademarks. Astra, however, has a wholly-owned research facility at Bangalore.

The company’s products are essentially concentrated in the cardiovascular, anaesthetics and respiratory segments and key brands include Pulmicort, Bicanyl and Imdur.

The company’s facility at Yelahanka is backed by 15 sales outlets all over the country. Zeneca, on the other hand, has a strong presence in the country’s agrochemicals segment. The British multinational operates mainly through its subsidiary Zeneca Agrochemicals, a seeds firm Advanta, specialty chemicals unit, Stahl India,and a joint venture with ITC Agrotech.

Key Zeneca brands in the agrochem segment include Gramaxone, Cymbush and Simper. The British giant, at present, operates through its facility at Ennore in Tamil Nadu and is putting up another facility in Gummudipundi there.

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Globally, the two firms have agreed on an all-share merger of equals to form AstraZeneca, a company with a $67-billion market capitalisation.

Zeneca shareholders will hold 53.5 per cent, while the balance will be with Astra shareholders. Astra was advised by Morgan Stanley on the deal.The $11.5-billion AstraZeneca will be number three in the world in prescription-drug sales, holding the number two slot in Europe and ranking seventh in the US.