Global drug ingredients maker Lonza Group AG will buy Arch Chemicals for $1.2 billion in cash for microbial-control business, Economic Times reported Tuesday.The drug ingredients maker will pay $47.20 a share, which is 12% higher than the closing price on July 8.
The deal will make Swiss company Lonza the leader in a market valued at $10 billion and allow it to expand its non-pharmaceutical business.
Lonza chief executive officer Stefan Borgas said,"Lonza and Arch Chemicals offer highly complementary products and technologies and together will be the global leader in controlling unwanted microbes."
According to data compiled by Bloomberg, the purchase values Arch Chemical at about 16.9 times last year’s net income. Also, the acquirers of specialty chemical companies paid a median of 19.1 times earnings in the past years. The acquisition values Arch Chemical at $1.4 billion.
The acquisition by Lonza will increase earnings by 40 centimes a share in the first year after its completed, Switzerland-based company said. Meanwhile, it expects cost savings of at least $50 million annually by the second year after the purchase, with $40 million of increased sales.
Also, the buy will result in one-time expenses of about $85 million over the next 2 years. Lonza also plans to begin a tender offer for Arch Chemicals by July 15 and complete it this year.