A report from German newspaper Badische Zeitung today is to reveal that Swiss drug company Roche will sell its vitamins division to DSM, the Dutch chemicals company.
A Dow Jones report said that the paper quotes sources from Roche's headquarters in Basel, saying the company intends to sell the unit because it is less profitable when compared with other company divisions.
Roche spokesman Alexander Klausen declined to comment upon the report, but told Dow Jones that "Roche is currently checking out several options" for the future of its SFr3.5 billion unit (€2.39bn), roughly 10 per cent of Roche's overall sales of SFr29 billion.
DSM spokesman Gerard van der Zanden also declined to comment, but said that considering DSM's expansion plans, an acquisition of a maker of vitamins "cannot be ruled out as a possibility."
He said, however, that while DSM is "talking to several parties," the company is not "getting nervous just yet," implying that a deal not imminent.
Dow Jones noted that DSM is in the process of transforming itself into a specialty chemicals company by selling its cyclical bulk-chemicals operations. Earlier this year, it closed a deal with Saudi Basic Industries, selling its petrochemicals operations.
DSM's ultimate goal is to have annual sales of €10 billion by 2005, derived from high-margin, non-cyclical specialty chemicals operations.
It will have to boost its total sales by around €4 billion to do so, according to the report, and it has said it wants to do that largely through acquisitions.
Analysts covering DSM have named German company Degussa and Christian Hansen Holding of Denmark as likely candidates for a takeover by DSM.
Michael Stone, an analyst with HSBC in London, told Dow Jones that Roche's vitamins division "could fit into the category in which DSM is looking to expand," adding that a possible buy would be a "positive move," provided DSM does not pay too much.
According to Stone, a price of around 1.5 times annual divisional sales would be reasonable.
Roche vitamin's unit was fined around $900 million for price-fixing in the bulk vitamin market last year. Adding to that trouble, experts say, is that the unit is only slowly growing and will be difficult to divest.
According to analysts, a possible buyer could not be a direct peer due to competition problems which stem from the strong market position of the unit. At the same time, breaking up the division would not make sense due to the tremendous synergies the division's units enjoy.