Lonza to buy Arch Chemicals in US$1.4bn deal


Lonza will become world leading microbial control business

Swiss ingredients supplier Lonza Group has agreed to buy Arch Chemicals of the US, a global biocides company providing systems to destroy or selectively inhibit the growth of harmful micro-organisms.

Arch operates in four main segments of water products, wood protection, personal care actives and industrial biocides.

Lonza has offered US$47.20 in cash for each Arch share, which represents a 36.7% premium over Arch Chemicals’ average closing price for the last month and values the company at US$1.4bn (CHF1.25bn).

Lonza expects to begin the tender offer by 15 July and to complete the deal later this year.

Lonza chief executive Stefan Borgas said the transaction was an ‘excellent strategic and cultural fit’ with Lonza and Arch Chemicals offering complementary products and technologies.

Michael Campbell, chairman, president and ceo of Arch Chemicals, added: ‘We are confident that we have found the right strategic partner to help our business reach the next level of success.’

Upon completion of the deal, Lonza will have the world’s leading microbial control business with 2010 pro-forma sales in the life science market of approximately US$1.6bn.

Lonza says it will be able to offer a broader range of products and actives to more customers in both established and the emerging markets of China, India, Brazil and South Africa, where increasing regulation is expected to lead to greater use of already approved active ingredients and formulations.

The company says the key growth sectors will be in the hygiene, water treatment, materials protection and personal care segments.

The combined business will also have a broad line-up of regulatory approved microbial control active ingredients, which will allow Lonza to bring to market new microbial control formulations and thereby grow revenues across the portfolio.

‘The acquisition of Arch Chemicals is the next logical step in Lonza’s life science focused strategy,’ said Borgas. ‘It will allow us to expand our non-pharma life science business to achieve a well-balanced profile based upon two world leading growth businesses – pharmaceutical contract manufacturing and microbial control.’

The global microbial control market is currently worth approximately US$10bn, and is growing at around 4–6% a year.

The key water treatment, hygiene, materials protection and personal care segments are growing at faster rates. The largest markets are North America, Europe and Japan.

Arch, headquartered in Norwalk, CT, US, has 23 manufacturing and research facilities worldwide and currently employs approximately 3,000 people. In 2010, it had sales of approximately US$1.4bn, of which approximately US$1.2bn were from microbial control products.

Lonza anticipates that the deal will result in one-time integration costs of US$85m over the next two years.