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Acquisitions and Divestitures
Below you will find a history of significant acquisitions and divestitures of the last years within the Bayer Group.
Business combinations and other acquisitions in in 2017
On January 3, 2017, Bayer Animal Health acquired the Cydectin™ portfolio in the United States from Boehringer Ingelheim Vetmedica, Inc., St. Joseph, Missouri, United States. The acquisition comprises the CYDECTIN Pour-On, CYDECTIN Injectable and CYDECTIN Oral Drench endectocides for cattle and sheep. The acquisition is intended to strengthen the antiparasitics portfolio in the United States through the addition of endectocides. A purchase price of €158 million was agreed. The purchase price pertained mainly to trademarks and goodwill, which, as expected, is fully tax-deductible.
Divestitures and discontinued operations in 2017
In October 2015, Bayer successfully floated the former MaterialScience subgroup on the stock market under the name “Covestro”. In view of the remaining majority interest, Covestro was fully consolidated in the Bayer Group until the end of September 2017.
Following various share sales, the interest held directly by Bayer was reduced to 24.6% by the end of September 2017. The buyers of the approximately 14 million shares sold on September 29, 2017, agreed to be bound by a lock-up arrangement pursuant to which they would not sell the shares they purchased until at least December 11, 2017. Under the contractual agreement, Bayer retained economic exposure to the price of the shares. Bayer Pension Trust holds a further 8.9% of the equity of Covestro AG.
In addition, Bayer and Covestro signed a control termination agreement at the end of September, as part of which Bayer undertakes not to exercise certain voting rights at the Covestro Annual General Meeting. Bayer therefore ceded de facto control of Covestro at the end of September 2017. Accordingly, the Covestro Group was deconsolidated at the end of the third quarter and, in view of Bayer’s remaining significant influence, was recognized for the first time as an associate. Further details of the accounting for the Covestro Group as an associate using the equity method are given in Note “Investments accounted for using the equity method”. Details of share sales are provided in Note “Equity”.
At the end of September, the fair value of the remaining interest, €3.6 billion, was determined on the basis of the share price. The deconsolidation and remeasurement of the remaining interest in Covestro resulted in overall income before taxes of €3.1 billion, which is included in income from discontinued operations. This figure reflects a gain of €2.4 billion from the remeasurement of the remaining interest, a gain of €0.5 billion from the deconsolidation, and a gain of €0.2 billion from the performance of the shares sold on September 29, 2017, in the fourth quarter of 2017. The overall gain after taxes amounted to €3.0 billion. A deferred tax expense of €32 million was accounted for as part of the remeasurement of the remaining interest. In addition, an amount of minus €0.6 billion recognized in other comprehensive income was reclassified to retained earnings attributable to Bayer AG stockholders.
Business combinations and other acquisitions in in 2016
On February 12, 2016, Bayer and CRISPR Therapeutics AG, Basel, Switzerland, established the joint venture Casebia Therapeutics LLP, Ascot, United Kingdom. Its purpose is the development and commercialization of new methods to treat blood disorders, blindness and heart diseases. Capital contribution liabilities of US$255 million to Casebia Therapeutics LLP were recognized in the statement of financial position as of December 31, 2016. These liabilities mature on December 31, 2020, at the latest. US$45 million was already paid in 2016, and a further US$60 million was paid on January 3, 2017.
On December 9, 2016, Bayer and Versant Ventures, San Francisco, United States, established the joint venture BlueRock Therapeutics LP, San Francisco, United States. The company will be active in the field of next-generation regenerative medicine. Its goal is to develop induced pluripotent stem cell (iPSC) therapies to cure a range of diseases. As of December 31, 2016, Bayer had capital contribution obligations of US$150 million pertaining to the establishment of the joint venture. This amount should be paid by December 31, 2020, at the latest.
Divestitures and discontinued operations in 2016
The sale of the Diabetes Care business to Panasonic Healthcare Holdings Co., Ltd., Tokyo, Japan, for around €1 billion was completed on January 4, 2016. The sale includes the leading Contour™ portfolio of blood glucose monitoring meters and strips, as well as other products such as Breeze™2, Elite™ and Microlet™ lancing devices.
The sale of the Consumer business (CS Consumer) of Bayer’s Environmental Science unit to SBM Développement SAS, Lyon, France, was completed on October 4, 2016. The Consumer business encompasses the Bayer Garden and Bayer Advanced businesses in Europe and North America.
Acquisitions in 2015
The purchase prices for the acquisitions made in 2015, along with adjustments to purchase prices and purchase price allocations effected in 2015 relating to previous years’ transactions, totaled €8 million (2014: €13,741 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Adjustments to purchase price allocations and other adjustments reduced the total carrying amount of goodwill by €5 million (2014: €5,169 million increase). The changes in goodwill mainly resulted from the following transactions:
On March 2, 2015, Covestro successfully completed the acquisition of all the shares of Thermoplast Composite GmbH, Germany, a technology leader specializing in the production of thermoplastic fiber composites. The aim of the acquisition is to expand the range of polycarbonate materials for major industries to include composites made from continuous fiber-reinforced thermoplastics. A purchase price of €18 million was agreed. This includes a variable component of €4 million. The purchase price mainly pertained to patents and goodwill.
On July 1, 2015, CropScience completed the acquisition of all the shares of SeedWorks India Pvt. Ltd., based in Hyderabad, India. The company is specialized in the breeding, production and marketing of hybrid seeds of tomato, hot pepper, okra and gourds. It has research and seed processing locations in Bangalore and Hyderabad, respectively. The purchase of SeedWorks India is intended to further strengthen CropScience’s vegetable seed business in India. A purchase price of €80 million was agreed, subject to the usual purchase price adjustments. The purchase price mainly pertained to patents, research and development projects and goodwill.
As part of the acquisition of the consumer care business of Merck & Co., Inc., Whitehouse Station, New Jersey, United States, the production facilities at the Pointe-Claire site in Canada were acquired on July 1, 2015. A purchase price of €67 million was agreed.
Divestitures in 2015
The effects of divestitures and material sale transactions made in 2015 and previous years on the consolidated financial statements were as follows:
On March 2, 2015, Consumer Health completed the sale of two equine products, Legend / Hyonate and Marquis, to Merial, Inc., Duluth, Georgia, United States. A purchase price of €120 million was agreed. The one-time payment is accounted for as deferred income. The purchase prices for Legend / Hyonate and Marquis will be reflected in sales and earnings over a four-year and a three-year period, respectively, as Bayer has entered into further significant obligations.
Acquisitions in 2014
The total purchase price of the acquisitions made in 2014 was €13,741 million (2013: €1,441 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Total goodwill of €5,990 million (2013: €801 million) arose on these acquisitions. It related principally to the following transactions:
On March 6, 2014, CropScience completed the acquisition of all the shares of Biagro Group, a producer and distributor of biological seed treatment solutions headquartered in General Las Heras in the province of Buenos Aires, Argentina. The company operates production facilities in Argentina and Brazil. Its portfolio of established brands includes seed-applied inoculants, plant-growth-promoting microorganisms and other products for integrated pest management based on bacterial and fungal strains. The acquisition will help CropScience to build on the success of its soybean seed business in Latin America. The acquisition remains subject to the approval of the Argentinian antitrust authorities. A one-time payment and purchase price adjustment totaling €10 million were agreed upon along with potential milestone payments reflected at €6 million in the purchase price allocation. The milestone payments are mainly dependent on the achievement of certain sales targets and product approvals. The purchase price mainly pertained to the technology platform and goodwill. Sales of €6 million were recorded since the acquisition date.
In March 2014, Pharmaceuticals successfully completed the takeover offer for the shares of Algeta ASA, Oslo, Norway, and acquired 100% of the outstanding shares. Bayer issued a takeover offer for all the shares of Algeta at a price of NOK362 per share in cash on January 20, 2014. On expiration of the offer deadline, Bayer had received acceptances from Algeta shareholders representing about 98% of the share capital. On March 14, 2014, a compulsory acquisition process was carried out to obtain the remaining 2% of the shares, also at a price of NOK362 per share.
Algeta develops novel cancer therapies based on its world-leading, patented technologies. The company develops alpha-pharmaceuticals designed to target cancers using the unique properties of alpha particle radiation. HealthCare and Algeta have collaborated since 2009 to develop and commercialize radium-223 dichloride, which was approved in the United States in May 2013 under the tradename XofigoTM. The acquisition strengthens the oncology business of Pharmaceuticals. The purchase price was €1,974 million, including €35 million for the settlement of the pre-existing relationship between Algeta and Bayer. The latter amount represents the value of the advantage enjoyed by the acquirer from the contractual relationship that existed prior to the acquisition compared to current market conditions for similar collaborations. The settlement amount is reflected in other operating income and at the same time increases the consideration transferred.
The purchase price mainly pertained to an intangible asset for the product-specific radium-223 technology along with goodwill. The goodwill is mainly attributable to synergies in administration processes and infrastructure, including cost savings in the selling, research and development, and general administration functions.
On September 30, 2014, CropScience completed the acquisition of the seeds business of Granar S.A., headquartered in Encarnación, Paraguay. Granar specializes in the breeding, production and marketing of improved seed, especially soybean seed, that is adapted to the growing conditions in subtropical regions. It has a strong presence in Paraguay and Uruguay and an increasing presence in Brazil. Granar will continue to sell the seed for its own account for the 2014/15 sowing season. Bayer will take over marketing in 2015. Part of the agreed one-time payment of €15 million to acquire the business has been retained for disbursement over the next six years and is reflected at €2 million in the purchase price allocation.
On October 1, 2014, HealthCare completed the acquisition of the consumer care business of U.S. company Merck & Co., Inc., Whitehouse Station, New Jersey. The acquired business is primarily comprised of products in the cold, allergy, sinus & flu, dermatology (including sun care), foot health and gastrointestinal categories. The most important brands are ClaritinTM (allergy), CoppertoneTM (sun care), MiraLAXTM (gastrointestinal) and AfrinTM (cold), and – in North America and Latin America – Dr. Scholl’sTM (foot health). These products complement Bayer’s existing range of non-prescription medicines.
The acquisition significantly enhances Bayer’s over-the-counter (OTC) business across multiple therapeutic categories and geographies. It gives Consumer Health the global number two position in a widely diversified sector and strong global positions in the five most important OTC segments: dermatology, gastrointestinal, sinus & flu (cold, allergy, sinus, flu), dietary supplements and pain therapy.
In those countries where the consumer care business was acquired via an asset deal, Merck & Co., Inc. will continue the sales activities in its own name for a transitional period until the marketing authorizations are transferred to Bayer or Bayer can take over the business as distributor. During this period, the economic rewards and risks will already accrue to Bayer, and Bayer will receive the operating profit on the business from Merck. The transitional period has already ended for the majority of countries.
Where the business was acquired via a share deal, Bayer purchased 100% of the respective company’s shares.
Bayer paid a provisional purchase price of €11,177 million, less specific amounts that are being retained pending the receipt of antitrust approvals in the Republic of Korea and the transfer of further assets. The provisional purchase price allocation mainly comprises goodwill of €5,137 million and acquired brands valued at €5,362 million. Goodwill is largely based on cost synergies, especially in marketing and manufacturing, as well as on sales synergies resulting from the increased distribution capability and use of the global infrastructure. As expected, a goodwill amount of €3,761 million is tax-deductible. The acquired business recorded sales of €289 million in the Consumer Health segment and €7 million in the Pharmaceuticals segment since the acquisition date.
Upon closure of this acquisition, the strategic pharmaceutical collaboration agreed between Bayer and Merck & Co., Inc. in the field of soluble guanylate cyclase (sGC) modulation also came into effect. Bayer’s aim in entering into the global co-development and co-commercialization agreement, which has already received antitrust clearance, is to strengthen its development potential in the cardiovascular therapeutic area. In this connection, Merck & Co., Inc. is to make payments to Bayer of up to US$2.1 billion, comprising an up-front payment of US$1.0 billion (€793 million) and sales milestone payments of up to US$1.1 billion related to future joint activities with certain compounds including AdempasTM (riociguat) to treat pulmonary hypertension. The one-time payment of €793 million is to be recognized in sales and earnings over a period of 13.5 years. It includes an amount of €15 million recognized for the fourth quarter of 2014.
On November 1, 2014, Consumer Health acquired all the shares of Dihon Pharmaceutical Group Co. Ltd., Kunming, Yunnan, China. Dihon is a pharmaceutical company specializing in the manufacture and marketing of over-the-counter (OTC) and herbal traditional Chinese medicine products. A provisional purchase price of €401 million was paid, based on a purchase price adjustment mechanism. The purchase price pertained mainly to acquired trademarks and goodwill. Sales of €3 million were recorded since the acquisition date.
On December 1, 2014, CropScience completed the acquisition of land management assets in the United States, Canada, Mexico, Australia and New Zealand from E. I. DuPont de Nemours and Company, United States. The acquisition provides CropScience with access to the growing forestry and range & pasture business segments in North America. Bayer paid a provisional purchase price of €120 million. A potential milestone payment for a successful registration was agreed upon in addition. This payment was included at €18 million in the purchase price allocation. The purchase price pertained mainly to intangible assets for product-related technologies and goodwill.
The acquired businesses named above contributed €305 million to Bayer Group sales in 2014. Of this amount, €296 million pertained to the consumer care business acquired from Merck & Co., Inc. and €3 million to Dihon. Their combined EBIT for 2014 amounted to minus €132 million, with the consumer care business acquired from Merck & Co., Inc. accounting for minus €57 million, Algeta for minus €52 million and Dihon for minus €22 million. Their total income after taxes since the respective dates of their first-time consolidation was minus €194 million, of which the consumer care business acquired from Merck & Co., Inc. accounted for minus €108 million, Algeta for minus €64 million and Dihon for minus €20 million. This includes the financing costs incurred since the respective acquisition dates.
Divestitures in 2014
On August 29, 2014, Consumer Health completed the sale of the Interventional device business to Boston Scientific Corporation, Natick, Massachusetts, United States. The sale comprised the AngioJetTM thrombectomy system and the JetstreamTM atherectomy system, as well as the FetchTM2 aspiration catheter used in cardiology, radiology and peripheral vascular procedures. The total transaction price, including fees for transitional services to Boston Scientific and before working capital adjustments, was €315 million. Disregarding the transitional services, a special gain of €80 million and deferred income of €2 million were recognized.
On October 1, 2014, the strategic pharmaceutical collaboration agreed between Bayer and Merck & Co., Inc., United States, in the area of soluble guanylate cyclase (sGC) modulation came into effect. Pharmaceuticals and Merck & Co., Inc. assumed joint control of the sGC modulators business. The collaboration agreement provides for future net cash flows to be equally shared between Bayer and Merck & Co., Inc. Of the goodwill allocated to the Pharmaceuticals segment, €173 million was derecognized through profit or loss as of the date the collaboration came into effect.
Acquisitions in 2013
Acquisition costs in 2013 amounted to €1,440 million (2012: €502 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Total goodwill of €801 million (2012: €190 million) arose on these acquisitions. It related principally to the following transactions:
On January 2, 2013, HealthCare wholly acquired the U.S. company Teva Animal Health Inc., headquartered in St. Joseph, Missouri. The acquisition broadens HealthCare’s range of anti-infective solutions for livestock and expands the existing product offering to include reproductive hormones. The transaction also adds dermatological products for companion animals, pet wellness products and nutraceuticals to the company’s portfolio. The parties agreed on a one-time payment of €38 million plus potential milestone payments, for which an amount of €45 million was included in the purchase price allocation. The milestone payments are mainly dependent on the achievement of various sales targets. The purchase price pertained mainly to product trademarks. Sales of €11 million were recorded since the acquisition date.
On January 18, 2013, CropScience acquired all the shares of PROPHYTA Biologischer Pflanzenschutz GmbH, a leading supplier of biological crop protection products headquartered in Malchow in the German state of Mecklenburg-Western Pomerania. In addition to research and development facilities, the acquisition also includes state-of-the-art production and formulation facilities in the city of Wismar. A purchase price of €25 million was agreed, pertaining mainly to technologies, research and development projects and goodwill. In addition, two related distribution rights were acquired for €5 million. Sales of €4 million were recorded since the acquisition date.
On March 15, 2013, CropScience wholly acquired soybean seed producer Wehrtec Tecnologia Agricola Ltda. and the soybean business of Agricola Wehrmann Ltda. Both companies are headquartered in Cristalina in the Brazilian state of Goiás. This transaction strengthens the soybean research and development activities of CropScience and contributes to the development of varieties tailored to the requirements of Brazilian soybean growers. A purchase price of €34 million was agreed along with potential milestone payments of up to €11 million. The purchase price pertained mainly to marketable crop plants, breeding material and goodwill. Sales of €16 million were recorded since the acquisition date.
In June 2013, HealthCare successfully completed the tender offer for the shares of Conceptus, Inc., currently headquartered in Milpitas, California, United States, and acquired 100% of the outstanding shares. Conceptus, Inc. has developed Essure™, the only non-surgical permanent birth control method, which it markets in the U.S. and other countries. This acquisition enables Bayer to offer an even broader range of short-term, long-term and permanent contraceptive choices for women. A purchase price of €780 million was paid, pertaining mainly to technology and trademark rights. The goodwill remaining after the purchase price allocation is attributable to various factors, including significant cost savings in the marketing and sales functions along with general administration and infrastructure synergies. Sales of €74 million were recorded since the acquisition date.
In April 2013, the District Court of Berlin reached a decision in the court proceeding initiated by former minority stockholders of Bayer Pharma AG (formerly Bayer Schering Pharma AG) to review the adequacy of compensation payments made by Bayer in connection with the domination and profit and loss transfer agreement of 2006. The court decided that the compensation paid by Bayer at the time should be increased by about 40%. Bayer disagrees with this decision and has appealed. The potential supplementary payment represents a subsequent purchase price adjustment according to the March 31, 2004 version of IFRS 3 applicable at the acquisition date. Additional goodwill of €261 million, excluding interest, has been capitalized for this proceeding and for the parallel proceeding relating to the squeeze-out of the former minority stockholders.
On July 1, 2013, HealthCare acquired all the shares of Steigerwald Arzneimittelwerk GmbH, Darmstadt, Germany. Steigerwald holds a strong position in the German phytopharmaceuticals market, which is focused on pharmacy-only herbal medicines. Its product portfolio includes Iberogast™ for the treatment of functional gastrointestinal disorders and Laif™ for the treatment of mild to moderate depression. A purchase price of €218 million was agreed, pertaining mainly to product trademarks, technologies and goodwill. Sales of €33 million were recorded since the acquisition date.
On December 2, 2013, CropScience acquired the start-up company FN Semillas S.A. and its parent company Holding Manager S.A., both headquartered in Buenos Aires, Argentina. The necessary regulatory approvals are pending. FN Semillas S.A. specializes in the breeding, production and marketing of improved soybean seeds in Argentina. A purchase price of €25 million was agreed, pertaining mainly to commercial cultivars, germplasm and goodwill.
In 2013 the acquired businesses named above contributed €138 million (of which Conceptus: €74 million) to Bayer Group sales and minus €69 million (of which Conceptus: minus €26 million) to EBIT. Their total income after taxes since the respective dates of their first-time consolidation was minus €57 million (of which Conceptus: minus €25 million). This includes the financing costs incurred since the respective acquisition dates.
Divestitures in 2013
On June 1, 2013, MaterialScience sold its global powder polyester resins business and its U.S.-based liquid polyester resins merchant business to Stepan Company of Northfield, Illinois, United States. A purchase price of €45 million was agreed. The divestment gain of €42 million is reported under special items.
The Bayer Group received further revenue-based payments of €25 million in connection with the transfer of the hematological oncology portfolio to Genzyme Corp., United States, effected in May 2009.
Business combinations and other acquisitions in fiscal 2012
Acquisition costs in 2012 amounted to €502 million. The purchase prices of the acquired companies or businesses were settled mainly in cash. Total goodwill of €190 million arose on these acquisitions. It related principally to the following transactions:
On March 31, 2012, Bayer acquired the remaining 50% interest in the systems house joint venture Baulé S.A.S., France. This joint venture was formed in 2008 by MaterialScience and Michel Baulé S.A., which was later renamed EXIMIUM S.A.S. Baulé S.A.S. is a global leader in the development, formulation and processing of polyurethane cast elastomers. The purchase price of €50 million pertained mainly to customer relationships and goodwill.
On July 2, 2012, CropScience acquired the watermelon and melon seed business of the U.S. company Abbott & Cobb Inc., headquartered in Feasterville, Pennsylvania. Abbott & Cobb has a robust position in the U.S. watermelon market, with increasing business in Mexico, Australia and Asia. The acquisition significantly strengthens the presence of CropScience in the watermelon and melon market. The melon seed business and the related germplasm add to its existing seed portfolio and provide the basis for new hybrids. A net purchase price of €43 million was agreed, pertaining mainly to germplasm, customer relations and goodwill.
On July 3, 2012, CropScience signed an agreement to purchase the U.S. company AgraQuest, Inc., headquartered in Davis, California. AgraQuest is a global supplier of innovative biological pest management solutions based on natural microorganisms. It focuses on discovering, manufacturing and marketing highly effective products for biological pest and disease control to safeguard and increase crop production. The acquisition will help CropScience to build a leading technology platform for biological products and to further strengthen its strategically important fruit and vegetables business. A purchase price of €375 million was agreed, pertaining mainly to the technology platform and goodwill. This amount comprises a one-time payment and potential milestone payments with a total fair value of €31 million. The acquisition received the necessary regulatory approvals and closed on August 15, 2012.
The acquired businesses named above contributed €42 million to Bayer Group sales in 2012. These portfolio changes had no material effect on EBIT for 2012. A total after-tax result of minus €2 million was recorded for the acquired businesses since the respective dates of their first-time consolidation. This includes the financing costs incurred since the respective acquisition dates.
Divestitures and assets held for sale in fiscal 2012
The effects of divestitures made in 2012 and previous years on the consolidated financial statements for 2012 are detailed below.
On April 15, 2012, Bayer entered into an agreement to sell all PET tracer substances to Piramal Imaging SA., Switzerland. This transaction includes the PET tracer florbetaben, which is currently in development for the detection of Alzheimer’s disease, the most common form of dementia. Revenue-based milestone and royalty payments were agreed upon.
The agreement with Genzyme Corp., United States, announced in March 2009, comprised the transfer of the hematological oncology portfolio to Genzyme, which was effected in May 2009. We also agreed to transfer the production site for Leukine™ after final inspection by the U.S. Food and Drug Administration (FDA). This inspection took place in March 2012. The agreement concerning the sale of the production site including inventories was signed on May 29, 2012. A purchase price of €71 million was agreed.
We received revenue-based payments of €99 million in 2012 in connection with the aforementioned transfer of the hematological oncology portfolio to Genzyme Corp., United States.
Business combinations and other acquisitions in fiscal 2011
Acquisition costs in 2011 amounted to €227 million (2010: €43 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Total goodwill of €103 million (2010: €12 million) arose on these acquisitions. It related principally to the following transactions:
On January 7, 2011, HealthCare acquired the New Zealand-based Bomac group, which supplies a broad range of animal health products for the livestock sector. The net purchase price of €73 million pertained mainly to customer relationships and goodwill. Bomac had sales of €33 million in 2011.
On April 1, 2011, CropScience acquired Hornbeck Seed Company, Inc., United States. Hornbeck Seed Company supplies soybean, rice, and wheat varieties in the southern United States and has an in-house soybean breeding program and a proprietary soybean germplasm. The net purchase price paid amounted to €30 million and pertained mainly to research and development projects and goodwill. Hornbeck Seed Company had sales of €7 million since the acquisition date.
On August 31, 2011, HealthCare acquired Pathway Medical Technologies, Inc., United States, through its subsidiary MEDRAD, Inc. Pathway Medical Technologies supplies products to mechanically remove arterial plaque. The net purchase price of €88 million pertained mainly to patents and goodwill. Pathway Medical Technologies had sales of €6 million since the acquisition date.
On October 6, 2011, CropScience acquired the oilseed rape seed business of the mid-size seed company Raps GbR, Germany. This mainly includes oilseed rape varieties that are already on the market and the company's breeding material. The net purchase price of €26 million pertained mainly to patented technologies and goodwill. The company had no sales since the acquisition date.
The purchase price allocations for Pathway Medical Technologies, Inc. and Raps GbR are not yet complete. Therefore, changes may yet be made in the allocation of the purchase price to the individual assets.
In connection with the acquisition of Athenix Corp., United States, in November 2009, milestone payments were agreed that led to a disbursement of €27 million in 2011.
The acquired businesses named above contributed €46 million to Bayer Group sales in 2011. These portfolio changes had an effect of minus €16 million on the operating result (EBIT) for 2011. A total after-tax result of minus €13 million was recorded for the acquired businesses since the respective dates of their first-time consolidation. This includes the financing costs incurred since the respective acquisition dates.
Divestitures and discontinued operations in fiscal 2011
The effects of divestitures made in 2011 and previous years on the consolidated financial statements for 2011 are detailed below.
The contract for the sale of Viverso GmbH to Nuplex Industries Ltd., New Zealand, was signed at the end of October 2011. The acquirer is a leading manufacturer of polymer resins based in New Zealand and Australia. Bayer is thus divesting its business in certain conventional coating resins. The transaction comprises Viverso GmbH including its plants and assets, selected product groups and trademarks. A payment of €65 million on the sale price of €69 million was received in 2011, and the remaining amount was recognized as a receivable in the statement of financial position.
In December 2011, a series of agreements was concluded between Nomad BioScience GmbH, Munich, Germany, and Bayer Innovation GmbH. The agreements include the sale of Icon Genetics GmbH. Icon Genetics discovers innovative methods for the development and use of genetically modified plants to produce therapeutically active substances. In return, Bayer will receive revenue-based royalties on future Nomad products manufactured using the patented magnICON™ technology. The lower of the carrying amount and the fair value less costs to sell was initially recognized along with an impairment loss of €38 million. A loss of €1 million was incurred on the sale of Icon Genetics GmbH. The transfer of assets and liabilities took place with economic effect as of December 31, 2011.
We received further revenue-based payments of €108 million in 2011 in connection with the transfer of the hematological oncology portfolio to Genzyme Corp., United States, effected in May 2009.
Business combinations and other acquisitions in fiscal 2010
Acquisition costs in 2010 amounted to €43 million (2009: €404 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Total goodwill of €12 million (2009: €177 million) arose on these acquisitions. It related principally to the following transactions:
Artificial Muscle, Inc. of Sunnyvale, California, United States, a technology leader in the field of electroactive polymers for the consumer electronics industry, was acquired on March 9, 2010. The purchase price of €21 million pertained mainly to patented technologies and goodwill.
The remaining 50% interest in BayOne Urethane Systems LLC was acquired on November 30, 2010. BayOne was previously a marketing joint venture between Bayer MaterialScience LLC and PolyOne Corp., headquartered in St. Louis, Missouri, United States, which specializes in customized formulations of polyurethane foams and elastomers. The purchase price of €15 million pertained mainly to customer relationships, which are reflected in other rights, and to goodwill. The remeasurement of the already held 50% equity interest to fair value resulted in a €12 million gain, which was recognized in other operating income. The effect of remeasurement was allocated among other rights (€6 million), production rights (€2 million) and goodwill (€4 million). The fair value of the already held interest at the acquisition date was €14 million. Since the purchase price allocation has not yet been completed, changes may yet be made in the allocation of the purchase price to the individual assets.
Divestitures and discontinued operations in fiscal 2010
There were no divestitures in 2010.
Business combinations and other acquisitions in fiscal 2009
Acquisition costs in 2009 amounted to €404 million (2008: €932 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Goodwill arising on these acquisitions totaled €177 million (2008: €380 million) and related principally to the following transactions:
On June 25, 2009, we acquired the remaining 10% of the shares of Bayer Polymers (Shanghai) Co. Ltd., China, for €24 million. The difference between the carrying amount of this 10% interest and the purchase price was recognized as goodwill.
On October 1, 2009, we acquired two dermatology product lines from SkinMedica, Inc., Carlsbad, California, United States, for €43 million. These prescription medications, Desonate® and NeoBenz® Micro, are marketed in the United States. The main components of the difference between the carrying amount of the acquired net assets and the purchase price are €37 million pertaining to production rights and trademarks for the two product lines and €5 million of goodwill.
On November 2, 2009, we acquired Athenix Corporation, a privately held biotechnology company headquartered in Research Triangle Park, North Carolina, United States, for €286 million. The purchase price includes future milestone payments of approximately €24 million that will fall due upon the achievement of certain development goals. Athenix has an extensive herbicide tolerance and insect control trait development platform, particularly for corn and soybeans. The main components of the difference between the carrying amount of the acquired net assets and the purchase price are an amount of €217 million pertaining to development technologies which is reflected in other rights, €69 million in deferred taxes and €132 million of goodwill. The goodwill relates mainly to the anticipated synergies from an increase in our ability to provide farmers worldwide with new technologies and complete agricultural solutions from sowing through to harvesting. Since the purchase price allocation has not yet been completed, changes may yet be made in the allocation of the purchase price to the individual assets.
Divestitures and discontinued operations in fiscal 2009
Proceeds from divestitures, including those detailed below, in 2009 totaled €454 million.
The strategic alliance with Genzyme Corporation, United States, announced on March 31, 2009, was implemented at the end of May 2009. In accordance with the agreement terms, we transferred the hematological oncology portfolio – Campath®/MabCampath®, Fludara® and Leukine® – to Genzyme. The divested assets were recognized as assets held for sale starting in the first quarter of 2009. They comprised €92 million in goodwill, €150 million in patents, €25 million in other intangible assets and €30 million in inventories. We are continuing our established co-development partnership with Genzyme for the active substance alemtuzumab for an indication in multiple sclerosis. A related payment of €55 million was received in 2009. The present value of anticipated future revenue-based payments is €363 million.
In May 2009 we acquired the remaining 49% interest in Berlimed, S.A., Spain, from Juste S.A. Quimica Farmacéutica (Juste), and in return sold our 51% share of Justesa Imagen, S.A., Spain, to Juste for €16 million. A payment of €3 million was received in 2009 and a receivable for the remaining amount was therefore recognized in the statement of financial position.
In addition, we sold the Thermoplastics Testing Center, Krefeld, Germany, to Underwriters Laboratories, Inc., United States, for €18 million in May 2009.
Business combinations and other acquisitions in fiscal 2008
Acquisition costs in 2008 amounted to €932 million (2007: €482 million). The purchase prices of the acquired companies or businesses were settled mainly in cash. Goodwill arising on these acquisitions totaled €380 million (2007: €210 million) and related principally to the following transactions:
Bayer subsidiary Medrad Inc. acquired the remaining shares of Possis Medical Inc. through its subsidiary Phoenix Acquisition Corp. in March 2008 for €227 million. By virtue of the merger of Phoenix Acquisition Corp. with Possis Medical Inc., the latter became a wholly owned subsidiary of Medrad. The main components of the difference between the value of the acquired net assets and the purchase price are €99 million pertaining to patented technologies, trademarks and research and development projects, €40 million in deferred taxes and €125 million of goodwill.
The acquisition of the over-the-counter (OTC) medicines business of U.S.-based Sagmel Inc. for €265 million was completed at the beginning of June 2008. The OTC business of Sagmel Inc. is now integrated into the operations of Bayer HealthCare in Russia, Ukraine, Kazakhstan, the Baltic states and several countries of the Caucasus and Central Asia regions. The main components of the difference between the value of the acquired net assets and the purchase price are €161 million pertaining to trademarks and €70 million of goodwill.
In July 2008 the over-the-counter (OTC) cough and cold medicines business of the Chinese company Topsun Science and Technology Qidong Gaitianli Pharmaceutical Co. Ltd. was acquired for €109 million. The main components of the difference between the value of the acquired net assets and the purchase price are €50 million pertaining to trademarks and €48 million of goodwill.
The protein engineering specialist Direvo Biotech AG, Cologne, Germany, was acquired at the end of September 2008 for €185 million. The main components of the difference between the value of the acquired net assets and the purchase price are €150 million pertaining to patented research and development technologies, €45 million in deferred taxes and €106 million of goodwill.
With the entry of the squeeze-out of the remaining minority stockholders of Bayer Schering Pharma AG in the commercial register on September 25, 2008, all the shares of the minority stockholders of Bayer Schering Pharma AG were transferred by operation of law to Bayer Schering GmbH, a wholly owned subsidiary of Bayer AG. The remaining minority stockholders received cash compensation of €98.98 per share pursuant to the resolution of the stockholders’ meeting of Bayer Schering Pharma AG held on January 17, 2007. The required sum of €695 million, which had been held in escrow accounts for this purpose, was paid out to the stockholders at the beginning of October 2008.
Divestitures and discontinued operations in fiscal 2008
The diagnostics activities, along with H.C. Starck and Wolff Walsrode, were recognized as discontinued operations in 2007. Tax payments made in connection with the divestiture of the diagnostics business and a subsequent purchase price payment are therefore recognized in discontinued operations in 2008 as well.
Business combinations and other acquisitions in fiscal 2007
Acquisition costs in 2007 amounted to €482 million. The purchase prices of the acquired companies or businesses were settled in cash. Goodwill arising on these acquisitions totaled €210 million.
In June 2006, the wholly owned subsidiary Bayer Schering GmbH acquired a majority interest in Bayer Schering Pharma AG (at that time known as Schering AG), Berlin, Germany, which was included in full effective June 23, 2006 in the consolidated financial statements of the Bayer Group. As of December 31, 2007, Bayer Schering GmbH held 96.32 percent of the shares in Bayer Schering Pharma AG. The purchase price allocation has been completed and is virtually unchanged compared with December 31, 2006.
On May 31, 2007, Bayer CropScience signed an agreement to acquire the U.S. cotton seed producer Stoneville Pedigreed Seed Company from Monsanto for the preliminary purchase price of US$ 314 million (€232 million) including ancillary acquisition costs. This company was included in full effective June 1, 2007 in the consolidated financial statements of the Bayer Group. The goodwill remaining after the purchase price allocation is mainly attributable to technology and distribution synergies. The acquisition strengthens the position of Bayer’s BioScience business unit in the U.S. cotton seed market.
On July 1, 2007, Bayer MaterialScience completed the acquisition of the Ure-Tech Group of Taiwan, the largest producer of thermoplastic polyurethanes (TPU) in the Asia/Pacific region, for US$ 85 million (€63 million).
Bayer HealthCare completed the announced acquisition of a biologics production facility in Emeryville, California, from Novartis. Bayer HealthCare will continue the production of Betaferon®/Betaseron® in Emeryville and is taking over the entire manufacturing and process technology and the facility’s employees. Novartis has received about US$ 183 million (€137 million) for the acquisition of the production facility, including the Biologics License Application (BLA), the transfer of the related equipment and inventories, and the leasing of certain buildings.
Divestitures and discontinued operations in fiscal 2007
Proceeds from divestitures in 2007 amounted to €5,421 million. The principal divestitures were as follows:
On June 29, 2006, Bayer AG concluded an agreement with Siemens AG for the latter to acquire the diagnostics business. The Bayer Group sold this business of Bayer HealthCare to Siemens AG, Munich, in January 2007 for €4.3 billion. Transfer of the business to the acquirer was completed on January 2, 2007. An initial payment of €0.4 billion had already been received at the end of 2006.
On November 23, 2006, an agreement was concluded to divest the activities of the H.C. Starck Group, formerly assigned to the Materials segment, to a consortium of two financial investors, Advent International and The Carlyle Group, for a purchase price of €1.2 billion less the assumption of some €0.3 billion in financial liabilities and €0.2 billion in pension obligations. Closing of the transaction took place on February 1, 2007.
An agreement was signed on December 18, 2006 to sell the companies of the Wolff Walsrode Group, which operates principally in the field of cellulose chemistry, to The Dow Chemical Company, U.S.A., for a purchase price of €0.5 billion less the assumption of financial liabilities and pension obligations totaling about €0.1 billion. Wolff Walsrode also was formerly assigned to the Materials segment. Following approval of the transaction by the antitrust authorities, closing took place on June 30, 2007.
The diagnostics activities, H.C. Starck and Wolff Walsrode are recognized as discontinued operations in 2007.
A total of €15,357 million was spent for acquisitions in 2006. The purchase prices of the acquired companies or businesses were settled in cash. Goodwill arising on these acquisitions totaled €5,804 million and is subject to an annual impairment test.
Significant Acquisitions in fiscal 2006
In June 2006, the wholly owned subsidiary Bayer Schering GmbH (at that time Dritte BV GmbH) acquired a majority interest in Schering AG, Berlin, Germany, which is included in full in the consolidated financial statements of the Bayer Group as of June 23, 2006. On that date Bayer Schering GmbH held 87.99 percent of the voting capital of Schering AG. This was preceded by a public takeover offer issued to stockholders of Schering AG by Bayer Schering GmbH on April 13, 2006. The European Commission cleared the acquisition on May 24, 2006; approval from the U.S. antitrust authorities was granted on April 21, 2006.
On July 31, 2006, Bayer Schering GmbH and Schering AG, as a dependent company, concluded a domination and profit and loss transfer agreement, which was approved by an Extraordinary Stockholders’ Meeting of Schering AG on September 13, 2006. This agreement took effect on October 27, 2006 when it was entered in the commercial register for the headquarters of Schering AG. Schering AG was renamed Bayer Schering Pharma AG effective December 29, 2006.
By December 31, 2006, Bayer Schering GmbH had raised its holding in the voting capital of Bayer Schering Pharma AG to 96.24 percent through the addition of further shares. The shares in Bayer Schering Pharma AG were purchased in tranches involving total cash outflows of €16,271 million, less total acquisition-related cash and cash equivalents of €1,025 million. The ancillary costs of the acquisition amounted to about €71 million.
The Extraordinary Stockholders’ Meeting of Bayer Schering Pharma AG on January 17, 2007 resolved to squeeze out the remaining minority stockholders. Pursuant to this resolution, the shares held by minority stockholders will be transferred to the majority stockholder Bayer Schering GmbH in return for cash compensation of €98.98 per share. Liabilities for anticipated cash compensation payments and guaranteed dividends to the minority stockholders raise the purchase price by €736 million to €17,007 million.
At the time they were acquired, the activities of Bayer Schering Pharma AG and its subsidiaries focused on the areas of gynecology and andrology, diagnostic imaging, specialized therapeutics, oncology, and the dermatology business operated by the Intendis group.
Effective January 9, 2006 Bayer Innovation GmbH acquired the biotech company Icon Genetics AG, Munich, Germany. Icon Genetics discovers innovative methods for the development and use of engineered plants to produce therapeutically active substances. The purchase price was €18 million.
On July 6, 2006, Bayer HealthCare LLC, U.S.A., acquired Metrika Inc., Sunnyvale, California, U.S.A., for €57 million. Metrika manufactures and markets the A1CNow+ appliance to monitor long-term blood glucose levels in diabetics.
Significant Divestitures in fiscal 2006
On November 30, 2006 Bayer sold its 49.9 percent interest in the GE Bayer Silicones joint venture to its partner General Electric. The sale of this interest generated proceeds of €431 million.
On April 3, 2006, Bayer Diagnostics Manufacturing Limited, Bridgend, U.K., divested its production facilities and activities to Kimball Electronics Wales Limited. The businesses divested comprise the manufacture of appliances for the diagnostics and diabetes care market.
To strengthen the focus on its core business, the Bayer CropScience subgroup divested various active ingredients and related rights in its Crop Protection segment in 2006, including Asulam®, a herbicide that was marketed as Asulox® and Asilan®. Total proceeds of divestitures by Bayer CropScience in fiscal 2006 were €47 million.
Discontinued Operations in fiscal 2006
On June 29, 2006, Bayer AG concluded an agreement with Siemens AG on the sale of the diagnostics business. This transaction closed on January 2, 2007.
On November 23, 2006 an agreement was concluded to divest the activities of the H.C. Starck Group, formerly assigned to the Materials segment, to a consortium of two financial investors, Advent International and The Carlyle Group. This business was transferred to the new owners on February 1, 2007.
An agreement was signed on December 18, 2006 to sell the companies of the Wolff Walsrode group, which operates principally in the field of cellulose chemistry, to The Dow Chemical Company, U.S.A. Wolff Walsrode also was formerly assigned to the Materials segment. Pending the approval of the antitrust authorities, the transfer of this business is expected to take place in the first half of 2007.
In 2005 a total of €2,406 million was spent on acquisitions, translated at the exchange rates in effect on the respective acquisition dates.
Significant Acquisitions in fiscal 2005
Since January 2005, the worldwide Roche consumer health business with non-prescription drugs and vitamins has been part of the Consumer Care Division of Bayer HealthCare. The transaction includes the global consumer health activities of Roche, with the exception of Japan, including the five production sites in Grenzach, Germany; Gaillard, France; Pilar, Argentina; Casablanca, Morocco; and Jakarta, Indonesia. Among the brands acquired are Aleve®, Bepanthen®, Redoxon®, Rennie® and Supradyn®. The merger puts Bayer among the largest global suppliers of prescription-free medicines. The acquired business contributed € 1,061 million to Group sales in 2005. The acquisition price for the worldwide consumer health business of Roche, before including the assumption of net financial liabilities, was approximately € 2,338 million, including about € 208 million for the purchase of the remaining 50 percent interest in the U.S. joint venture with Roche. This purchase was completed in 2004 in an economically and legally separate transaction.
In connection with the acquisition of Aventis CropScience Holding, S.A., France, in 2002, the antitrust authorities required Bayer to divest some of the operations acquired from Aventis. In this connection, the business with the active ingredient fipronil was sold to BASF AG, Ludwigshafen, Germany, in 2003. On January 31, 2005, Bayer CropScience AG, Monheim, Germany, signed an agreement with BASF to license back the rights to this product for agricultural applications in certain countries outside of Europe and the United States, for € 125 million.
On February 10, 2005, Bayer CropScience GmbH, Frankfurt am Main, Germany, and Bayer CropScience LP, Research Triangle Park, North Carolina, United States, acquired various intangible assets and the property, plant and equipment required for the production of cotton seeds from Associated Farmers Delinting, Inc., a regional cotton seed producer based in Littlefield, Texas, for € 9 million.
On July 8, 2005, Bayer South East Asia Pte Ltd., Singapore, received marketing rights for the cardiovascular drug Zetia® to the value of € 100 million under a co-marketing and distribution agreement with Schering-Plough.
Bayer MaterialScience LLC, Pittsburgh, Pennsylvania, acquired Polythane Systems, Inc. (PSI), Spring, Texas, on August 31, 2005, for € 20 million. PSI is a leading American supplier of polyurethane spray foam systems for roof insulation.
Significant Divestitures in fiscal 2005
The Bayer CropScience subgroup divested a number of activities in 2005 to strengthen the focus on its core business. These included Philagro Holding S.S., France, and EqSeeds Comercia de Sementes Ltda., Brazil. Bayer CropScience also divested the businesses with various active ingredients together with the related rights, including the acaricide and insecticide Amitraz, which it marketed as Mitac®.CropScience also sold its site in Hauxton, United Kingdom, in December 2005, and BCS S.A., France, divested its interest in Holdisa S.r.l., Italy. The selling prices of the operations divested by Bayer CropScience in fiscal 2005 totaled € 80 million.
Discontinued Operations in fiscal 2005
In November 2003 the Board of Management and Supervisory Board of Bayer AG decided to separate from the Bayer Group major parts of the chemicals activities and about one third of the polymers activities. These activities were subsequently placed in the LANXESS subgroup. The separation took place by way of a spin-off pursuant to the German Transformation Act (Umwandlungsgesetz). For this purpose, a Spin-Off and Acquisition Agreement was concluded between Bayer AG and LANXESS AG in September 2004. This was approved at an Extraordinary Stockholders’ Meeting of Bayer AG held in Essen, Germany, on November 17, 2004.
The Joint Spin-Off Report of the boards of management of Bayer AG and LANXESS AG contains a detailed description of the spin-off, together with an explanation of the background.
On January 28, 2005 the spin-off of LANXESS was entered in the commercial register for Bayer AG. The shares of LANXESS AG were legally assigned upon their issuance on that date to Bayer AG stockholders. Since January 31, 2005 shares in LANXESS have been listed in the Prime Standard subsegment of the official market segment (Amtlicher Markt) of the Frankfurt Stock Exchange. The LANXESS subgroup was therefore deconsolidated from the Bayer Group effective January 31, 2005.
In addition, plans were announced in October 2003 to divest the plasma activities of the Biological Products Division of the HealthCare subgroup. These activities, too, are reported as discontinued operations. This decision does not affect the Kogenate® operations. In December 2004 a contract was signed to sell the plasma business in the United States to Talecris BioTherapeutics, Inc., a new company controlled by the U.S. equity investors Cerberus Capital Management L.P., New York, and Ampersand Ventures, Wellesley, Massachusetts. This transaction was closed on March 31, 2005.
In 2004 a total of €358 million was spent on acquisitions, translated at the exchange rates in effect on the respective acquisition dates.
Significant Acquisitions in fiscal 2004
Effective March 22, 2004 we acquired the remaining interest in the seed treatment business of Gustafson in the United States, Canada and Mexico from Crompton Corporation for €100 million. Bayer CropScience already held a 50 percent interest in the U.S. and Canadian Gustafson joint ventures headquartered in Plano, Texas, and Calgary, Alberta. Gustafson manufactures and markets seed treatment products and related technical equipment.
In connection with the acquisition of the Roche Consumer Health business, Bayer HealthCare LLC, Pittsburgh, Pennsylvania, acquired on December 29, 2004 Roche’s 50 percent interest in the Bayer-Roche OTC joint venture in the United States that was established in 1996. The purchase price for the 50 percent equity interest plus additional plant and inventories was €208 million.
Bilag Industries Private Ltd., India, a joint venture with the Indian company Bilakhias, acquired 6 percent of its own shares on February 17, 2004, and a further 10 percent on April 8, 2004, from Bilakhias as part of its buy-back plan. The total purchase price was €29 million. Following closing of both transactions, Bayer CropScience S.A., France, now holds 91 percent of the shares of Bilag Industries Private Ltd.
Significant Divestitures in fiscal 2004
On January 30, 2004 Bayer CropScience sold the rights to GA 21, a technology for herbicide tolerance in corn, to Syngenta International AG, Basel, Switzerland.
On July 14, 2004 Bayer divested its 15 percent equity interest in KWS Saat AG, acquired through the purchase of Aventis CropScience in 2002, to private investors Tessner Beteiligungs GmbH and Dr. Arend Oetker to fulfil a contractual commitment made by the Bayer Group in connection with the acquisition of the Aventis CropScience group.
The acquisition of the Frankfurt-based textile dyes business DyStar by the global financial investor Platinum Equity, Los Angeles, California, was completed on August 5, 2004. All the shares held by the previous owners Bayer (35 percent), Hoechst (35 percent) and BASF (30 percent) were transferred to Platinum Equity. DyStar, the world’s premier supplier of dyes and services for the textile industry, was established in 1995 by Bayer and Hoechst and expanded in 2000 to include the textile dyes operations of BASF.
In 2003 a total of €72 million was spent on acquisitions, translated at the exchange rates in effect on the respective dates of acquisition.
Significant Acquisitions in fiscal 2003
At the start of July 2003 Bayer acquired the remaining interest in the Bayer Polymers Sheet Europe group (formerly Makroform), headquartered in Darmstadt, Germany, for €59 million. Bayer previously held an interest of 54.5 percent in this joint venture, which was set up in mid-2000. The other 45.5 percent was held by Röhm GmbH. The acquired group comprises Bayer Polymers Sheet GmbH, Darmstadt, Germany; Bayer Polymers Sheet N.V., Tielt, Belgium; and Bayer Polymers Sheet SpA,Milan, Italy.
Significant Divestitures in fiscal 2003
By the end of fiscal 2003, the conditions set by the European, U.S. and Canadian antitrust authorities for the acquisition of Aventis CropScience Holding S.A., France, as of June 1, 2002 had been met in full, except for those relating to propoxycarbazone. In compliance with these regulatory conditions, Bayer CropScience AG sold the insecticide active ingredients fipronil (worldwide, except China) and ethiprole, and the attendant rights to BASF AG, Ludwigshafen, Germany, together with a number of fungicidal active ingredients (principally in Europe, though the transaction also included a non-exclusive license for seed treatment outside Europe). The €1,330 milllion transaction also included inventories, as well as production facilities in Elbeuf, France. Adjusted for the backlicensing of these products in accordance with the conditions set by the E.U. and the FTC to give Bayer CropScience access to certain non-agricultural markets, the selling price totaled €1,185 million. The Bayer CropScience subgroup also divested a large number of low-volume products and inventories for a total of €118 million to comply with antitrust conditions.
As part of the streamlining of the Bayer HealthCare portfolio, initiated in 2002, the Bayer Group sold the remaining parts of the Consumer Care Business Group’s household insecticides business to SC Johnson & Son Inc., of the United States, for €339 million after obtaining the necessary approvals from the respective local antitrust authorities. Alongside inventories, SC Johnson acquired marketing rights to products such as Baygon®, Autan®, Bayclin® and Bayfresh®. Bayer will continue to manufacture the active ingredients for these products, which it will supply to SC Johnson and other users. The divestiture of the household insecticides business had already generated proceeds of €386 million in 2002.
The successful five-year research cooperation between Bayer HealthCare AG and Millennium Pharmaceuticals Inc., U.S.A. was terminated in the fourth quarter of 2003. At the same time, Bayer AG sold its 6.6 percent interest in Millennium Pharmaceuticals to the investment bank CSFB for €272 million.
In fiscal 2003 the Bayer Group sold further real estate in Germany, Belgium and Spain for a total of €122 million, continuing the streamlining of its portfolio. In 2002 it had already sold its interest in Baywoge GmbH, together with land and buildings owned by this company, for €528 million.
Effective April 1, 2003 Bayer sold its 50 percent interest in the PolymerLatex group, which is based in Marl, Germany, to Soros Private Equity Partners for €118 million. Comprised of seven companies, PolymerLatex is a leading supplier of latex products for paper, carpets/molded foam and specialty applications.
At the end of January 2003 the Bayer Group’s organic pigments business was sold to the Sun Chemicals group, of the United States, for €46 million.
In December 2003, Bayer HealthCare AG sold its rights to the Bayovac® (IBR marker vaccines) and Baypamun® (immunomodulator) brands to Pfizer for a total of €32 million. This transaction included a toll manufacturing agreement under which Bayer will continue to manufacture these products for a transition period of three years. This divestiture does not include the foot-and-mouth vaccines, which Bayer HealthCare will continue to manufacture and market.
In the fourth quarter of 2003, Bayer AG sold its subsidiary Walothen GmbH, Walsrode, Germany, to the Wihuri group, of Finland, for €9 million. This company manufactures high-quality polypropylene films for the following market segments: films for the tobacco industry, films for print lamination, overwrap films and standard films. It was formerly part of the Bayer Chemicals subgroup.
In 2002 a total of €7.9 billion was spent on acquisitions, calculated at exchange rates at the time of acquisition.
Significant Acquisitions in fiscal 2002
Bayer CropScience AG, Monheim, acquired Aventis CropScience Holding S.A., France, effective June 1, 2002 from its previous owners Aventis S.A., France, and Schering AG, Berlin, Germany, for €7.8 billion, including the assumption of debt. Aventis CropScience is one of the leading companies in the areas of crop protection, biotechnology and agrochemical specialties. Approval of this acquisition by the relevant antitrust authorities, particularly in Europe and the United States, was conditional upon Bayer’s divesting or outlicensing a number of products with total sales of €650-700 million.
On October 11, 2002 Bayer Corporation, United States, acquired Visible Genetics Inc., Canada. The purchase price was €62 million. This acquisition gives the Diagnostics Business Group two automated DNA sequencing systems marketed under the tradename OpenGene™ and the TRUGENE™ HIV genotyping kits, which permit testing for resistance to HIV drugs.
Bayer acquired Tectrade A/S, Denmark, at the start of April 2002 for €19 million. Tectrade develops customized polyurethane formulations. The acquisition comprises further subsidiaries, a technical service center and a formulating plant.
Effective December 6, 2002 our U.S. subsidiary Bayer Corporation acquired two biocides – thiabendazole and dibromodicyanobutane – and certain patented formulations of these biocides from Ondeo Nalco Inc., United States for €14 million. The acquisition also includes the Tektamer®, Biochek® and Metasol® tradenames. The active substances acquired provide protection against microorganisms such as yeasts, fungi, bacteria and algae, which can impair the quality of products and functional fluids.
Significant Divestitures in fiscal 2002
As part of the streamlining of the Bayer Group’s portfolio, Bayer AG sold its wholly owned subsidiary Haarmann & Reimer GmbH, a manufacturer of flavors and fragrances based in Holzminden, Germany, including its subsidiaries, to the financial investor EQT Northern Europe Private Equity Funds, for €1.7 billion effective September 30, 2002. The divestiture of this business group, which is reflected in discontinuing operations, included not only the Haarmann & Reimer companies but also the Haarmann & Reimer business operations of several of Bayer’s foreign subsidiaries.
The 30 percent interest in the Belgian imaging company Agfa-Gevaert N.V., which Bayer continued to hold after the stock market placement of the other 70 percent of the shares in 1999, was sold to the investment bank Goldman Sachs for €714 million at the start of June 2002.
Effective March 1, 2002 Bayer AG sold its 94.9 percent interest in Bayer Wohnungen GmbH to TreuHandStelle für Bergmannswohnstätten im rheinisch-westfälischen Steinkohlenbezirk GmbH for €528 million. In addition to this interest, the transaction included further land and buildings owned by Bayer Wohnungen GmbH.
As part of the continued streamlining of its portfolio, Bayer sold to SC Johnson & Son Inc., United States, a large part of the global household insecticides business of its Consumer Care Business Group for €386 million effective December 31, 2002. The operations sold at year end were those for which regulatory approval of the transactions had already been given. In addition to the affiliates in Indonesia and Barbados and the inventories, SC Johnson has acquired the marketing rights to products such as Baygon®, Autan®, Bayclin® and Bayfresh®. Bayer will continue to manufacture the active ingredients for these products, which it will supply to SC Johnson and other customers. The divestment of the household insecticides in fiscal 2002 relates to Australia, Belgium, Brazil, Costa Rica, El Salvador, Guatemala, Hong Kong, Indonesia, Italy, the Philippines, South Africa and Spain.
In fiscal 2002, conditions set by the European antitrust authorities, the Federal Trade Commission (FTC) in the United States and the Canadian Competition Bureau for the acquisition of Aventis CropScience Holding S.A., France, were met. At the end of December 2002 the cereal herbicide Everest® was sold to Arvesta Corporation, which is headquartered in the United States, for €123 million, while the crop protection agent Goltix® and the exclusive marketing licenses for Herold® in Germany and Belgium were sold to Makhteshim-Agan Industries Ltd., Israel, for €138 million.
In fiscal 2002 the Bayer Group divested its French and Spanish generic pharmaceuticals operations as part of its drive to streamline the portfolio. Effective June 28, 2002 Bayer sold its stake in Bayer Classics S.A., France and the production site in Sens, via its French subsidiary Bayer Pharma France S.A., to the Israeli company Teva Pharmaceutical Industries Ltd. for €97 million. On April 17, 2002 Bayer sold its 50 percent interest in the Spanish generics company Bayvit S.A., Barcelona, which specializes in marketing and distribution, for €33 million. Bayer’s stake and the remaining 50 percent, which was held by the privately owned company Vita Invest S.A., Spain, were acquired by STADA Arzneimittel AG, Bad Vilbel, Germany.
In 2001 a total of €514 million was spent on acquisitions. The purchase prices of the foreign acquisitions are translated at the exchange rates in effect at the respective dates of acquisition.
Significant Acquisitions in fiscal 2001
In June 2001, Bayer Corporation, United States, acquired at a cost of €116 million development, manufacturing and distribution rights for products to detect antibodies to the hepatitis C virus (HCV) and HIV from the strategic cooperation between Ortho-Clinical Diagnostics Inc., Raritan, New Jersey, and Chiron Corporation, Emeryville, California. This acquisition expands the Diagnostics Business Group’s portfolio of immunodiagnostic agents, strengthening its laboratory testing segment.
Bayer expanded its crop protection business in Europe on February 1, 2001 by acquiring MIKADO®, a leading corn herbicide, from Syngenta AG, Basel, Switzerland, for €115 million. The transaction covers business in the European Union and EFTA (European Free Trade Association) countries as well as patents, registrations, trademark rights, and production and formulation expertise.
Bayer AG has purchased a €93 million equity interest in CuraGen Corporation, New Haven, Connecticut, a leading biotech company. The objective of the collaboration agreement concluded with CuraGen in mid-January 2001 is to jointly develop and market novel drugs to treat obesity and diabetes. The intention is also to use special genomicsbased technologies to evaluate substances in Bayer’s early pharmaceutical research pipeline regarding their suitability for further clinical development.
On May 1, 2001, Bayer Corporation, United States, increased its equity ownership in PharmaNetics Inc., Raleigh, North Carolina, by a further €25 million for the Diagnostics Business Group. The existing distribution agreement with PharmaNetics was expanded to cover Theranostic tests (rapid diagnostic testing during drug therapy), a core component of the technology platform offered by PharmaNetics Inc. The agreement includes non-exclusive rights in the U.S. and exclusive rights elsewhere for the Diagnostics Business Group to distribute Theranostic tests.
In February 2001, Bayer acquired a €17 million equity interest in PPL Therapeutics plc, Edinburgh, United Kingdom. PPL Therapeutics is a biotech company involved in the discovery, development, production and marketing of genetically modified proteins for therapeutic purposes and food products. The Pharmaceuticals Business Group and PPL Therapeutics have concluded an agreement under which Bayer will pursue the clinical development of, and acquire, global exclusive marketing rights to the company’s major product, rAAT (recombinant alpha-1-antitrypsin). PPL Therapeutics intends to manufacture the product in a new facility currently scheduled for construction.
On February 12, 2001, the Pharmaceuticals Business Group purchased a €16 million equity interest in Avigen Inc., Alameda, California, a leading biotech company. The investment gives Bayer global, exclusive marketing and distribution rights to the gene therapy Coagulin-B™ developed by Avigen Inc. for the treatment of hemophilia B by gene transfer. Avigen Inc. intends to meet global demand for Coagulin-B™ from manufacture in a new production facility scheduled for construction.
On March 15, 2001, Bayer Corporation concluded an agreement on HIV and hepatitis C virus (HCV) tests with the biotech company Innogenetics N.V., Ghent, Belgium, for the Diagnostics Business Group. For €12 million Bayer acquired exclusive worldwide distribution and marketing rights, including rights to further developments in the future, for the HIV and HCV product lines manufactured by Innogenetics.
H.C. Starck GmbH, Goslar, Germany, a subsidiary of Bayer AG, acquired TeCe Technical Ceramics GmbH & Co. KG, Selb, Germany from Deutsche Shell GmbH for €9 million effective January 1, 2001. The acquisition complements H.C. Starck’s activities in surface technology and ceramics. The very good manufacturing conditions and geographical advantages support H.C. Starck’s aim of expanding its position in the U.S. market.
In December 2001, the Consumer Care Business Group of Bayer’s Mexican subsidiary Bayer de México, S.A. de C.V. purchased the marketing rights to Cevalin®, a leading vitamin C brand, and the well-known disinfectant Merthiolate® from Eli Lilly.
Significant Divestitures in fiscal 2001
Bayer sold its 50 percent interest in EC Erdölchemie GmbH, Cologne, Germany to the other joint venture partner Deutsche BP AG, Hamburg, Germany, effective May 1, 2001, following approval from the E.U. Commission. The proceeds of the sale amounted to €476 million. Future raw material supplies from Erdölchemie to Bayer are contractually assured, as is the provision of services by Bayer to Erdölchemie.
Bayer Group company Wolff Walsrode AG sold its subsidiary Covexx Films, Walsrode, Germany, a company specializing in high-performance films, to Wipak, part of the Wihuri group of Finland, effective June 1, 2001.
Effective April 1, 2001, Bayer AG sold the H-acid production facilities on its Brunsbüttel site to Rütgers Elbechemie GmbH, a subsidiary of Rütgers VTF AG.
Bayer sold its interest in ChemDesign Corporation, Fitchburg, Massachusetts, to Chestnut Acquisition Corporation, Mendham, New Jersey, a subsidiary of Chestnut Investments LLC, Mendham, New Jersey, effective November 30, 2001. ChemDesign manufactures organic chemicals mainly for the agrochemical and photographic industries.
As part of the planned divestiture of Bayer’s fibers activities, the Dralon® business was sold to the Fraver group of Biella, Italy, at the beginning of the year.
In 2000 a total of €4.2 billion was spent on acquisitions. The purchase prices of the foreign acquisitions are translated at the exchange rates in effect at the respective dates of acquisition.
Significant Acquisitions in fiscal 2000
Effective March 31, 2000 Bayer acquired the polyols business of Lyondell Chemical Company, Houston, Texas, United States. The acquisition comprised U.S. production facilities in Institute and South Charleston, West Virginia, and Channelview, Texas; European plants in Rieme, Belgium, and Fos-sur-Mer, France; companies in Indonesia, Singapore and Taiwan; and research facilities in Newtown Square, Pennsylvania; South Charleston, West Virginia; Villers St. Paul, France; and Singapore. The total purchase price, including an equity interest in propylene oxide production, was €2.6 billion.
The Crop Protection Business Group acquired the FLINT® line of crop fungicides from Novartis effective December 7, 2000. This €880 million acquisition includes global ownership of all associated intellectual property rights, registrations and trademarks, production and formulation know-how and the production facilities in Muttenz, Switzerland. At the same time Bayer acquired the exclusive right to market certain products based on the active ingredient cyproconazole in the European Union.
On October 21, 2000 Bayer Corporation, the U.S. subsidiary of Bayer AG, purchased 99.6 percent of the approximately 5.7 million outstanding shares of U.S. polymers and specialty chemicals producer Sybron Chemicals Inc., Birmingham, New Jersey, at a price of US$ 35 per share. The total purchase price, including all of Sybron’s liabilities, was approximately €386 million. The acquisition provides Bayer’s Coatings and Colorants Business Group and Specialty Products Business Group with access to new technologies and products.
Effective November 17, 2000 Bayer subsidiary H.C. Starck GmbH & Co. KG of Goslar, Germany acquired the CSM group of companies, headquartered in Cleveland, Ohio, United States, for €146 million. CSM is a manufacturer of molybdenum and tungsten mill products as well as machined components and fabrications made from alloys of other refractory metals.
Our U.S. subsidiary Bayer Corporation acquired major parts of the paper chemicals business – including patents and knowhow – of the U.S. specialty chemicals manufacturer Cytec Industries Inc., West Paterson, New Jersey, for €107 million, effective November 1, 2000.
On June 1, 2000 the Consumer Care Division of Bayer Corporation purchased the complete RID® line of head lice treatments from Pfizer Inc. The €99 million acquisition includes all the related patents.
Effective January 1, 2000 we acquired for €27 million the remaining 50.1 percent of the shares of Misung Ltd., Pyongtaek, South Korea, which up till that time had been a joint venture with Aventis S.A. Misung formulates and markets a wide range of crop protection products in South Korea.
On December 15, 2000 Bayer Ltd., Japan, purchased a further 10 percent of the shares of Sumitomo Bayer Urethane Co., Ltd., Japan, a joint venture with Sumitomo Chemicals Co. Ltd., for €7 million, thereby raising Bayer’s interest to 60 percent.
The Consumer Care Business Group strengthened its skin care products business and improved its position in the British market through the acquisition by U.K. subsidiary Bayer plc of the Germoloid® brand effective January 1, 2000. The purchase price paid to GlaxoSmithKline was €11 million.
Significant Divestitures in fiscal 2000
Bayer sold its 25 percent interest in Schein Pharmaceutical Inc., Florham Park, New Jersey, United States, to Watson Pharmaceuticals Inc. effective July 31, 2000 for €170 million.
Also effective July 31, 2000 the Animal Health Division of Bayer Corporation sold the U.S. livestock vaccines business to the animal health company Intervet International, a subsidiary of Akzo Nobel, Arnhem, Netherlands, for €81 million.
Bayer Corporation sold its 11 percent interest in Myriad Genetics of Salt Lake City, Utah, United States, for €76 million.
Effective October 18, 2000 we sold the subsidiary Bayer Solar GmbH to the SolarWorld group of Bonn, Germany in return for a cash payment of €38 million and an approximately 9 percent interest in the photovoltaics company SolarWorld AG. The total proceeds of this divestiture amounted to €56 million.
In 1999 a total of €356 million was spent on acquisitions. The purchase prices of the foreign acquisitions are translated at the exchange rates in effect at the respective dates of acquisition.
Significant Acquisitions in fiscal 1999
On April 1, 1999 Bayer purchased the global polycarbonate and polyester plastic sheet business of the Dutch chemicals group DSM for €172 million. The acquisition comprises two companies – Axxis N.V. in Belgium and Sheffield Plastics Inc. in the United States.
The assets of the Australian company Laserlite, also a manufacturer of plastic sheet, were acquired on March 15, 1999 for €15 million.
Effective October 31, 1999, our U.S. subsidiary Rhein Chemie Corporation acquired the business and the assets of Elastochem, Inc., one of the leading American suppliers of customized additives and specialties for the rubber industry, for €61 million.
In 1999 we concluded a five-year research agreement with LION Bioscience AG of Heidelberg, Germany, with the aim of applying modern genomics and information technologies more efficiently to research and develop innovative drugs and diagnostic markers for the Pharmaceuticals and Diagnostics business groups. As part of this cooperation, Bayer purchased an 11.28 percent interest in LION on August 26, 1999 for €28 million.
On December 17, 1999 we acquired the remaining 33.3 percent of the shares of Bayer Polímeros S.A., Brazil. This manufacturer of acrylonitrile-butadienestyrene (ABS) plastics is now a wholly owned subsidiary. Under the agreement reached when we first purchased an interest in 1997, the price paid for the remainder of the shares was €19 million.
On February 1, 1999, our subsidiary Bayer plc purchased 100 percent of the shares of pbi Home & Garden Limited, United Kingdom, from Sumitomo Corporation of Japan for €13 million. The acquisition of this company, which supplies plant protection products and fertilizers for amateur gardeners, marked our entry into Europe’s second largest market for home garden products.
Our Diagnostics Business Group acquired the oncology diagnostics business – headquartered in Cambridge, Massachusetts – of OSI Pharmaceuticals, Inc. on December 2, 1999 for €11 million. The acquisition, effected through our U.S. subsidiary Bayer Corporation, comprises mainly patents and know-how in the field of cancer diagnostics.
Significant Divestitures in fiscal 1999
The most significant divestiture during 1999 was the sale of 70 percent of the stock of Agfa-Gevaert N.V. of Belgium. On June 1, 1999, Bayer disposed of 70 million shares – one half of its total holding – to private and public investors by way of an initial public offering at an offer price of €22 per share. In addition, the Belgian holding company Gevaert N.V. acquired 20 percent of the shares – 15 percent at the time of the stock market listing and a further 5 percent on August 31, 1999 – also for €22 per share. Gevaert N.V. has the option of purchasing from Bayer a further interest in Agfa-Gevaert N.V., amounting to at most 10 percent of the stock, within one year from the date of purchase of its initial holding.
Note: The information below is provided as reported in the Annual Report 1998. The reporting currency in year 1998 was DM (German Mark). For a translation of the amounts into € (Euro) please use the following fixed conversion rate:
1 € (Euro) = 1.95583 DM (German Mark).
In 1998 a total of DM 2.8 billion was spent on acquisitions.
Significant Acquisitions in fiscal 1998
The Chiron Diagnostics group of the United States was wholly acquired on November 30, 1998 for DM 1.9 billion. Chiron Diagnostics is a manufacturer of diagnostic systems, mainly for hematology and immunology.
To expand its activities in crop protection, the Bayer Group purchased 50 percent of the seed treatment business of the U.S. company Gustafson on November 20, 1998 for DM 303 million.
The acquisition of the offset printing plates and graphic films business units of the U.S. company DuPont, agreed on in 1997, closed on March 1, 1998. The acquired business and the related assets and liabilities were integrated directly into the local Agfa companies worldwide. The total purchase price paid to DuPont was DM 210 million.
On November 10, 1998 Bayer AG concluded a cooperation agreement with Millennium Pharmaceuticals Inc. of the United States, giving Bayer access to key technologies in modern genome research. The collaboration also involves a 14.37 percent equity investment in Millennium, for which a purchase price of DM 160 million was paid.
In the United Kingdom, Bayer strengthened its crop protection business by acquiring the seed treatment business of Zeneca on May 13, 1998. The price paid for the business and the related assets and liabilities was DM 35 million.
On July 15, 1998 our subsidiary Wolff Walsrode AG purchased the plastic films business of Elf Atochem to further expand its position as a supplier of high-quality polyurethane films. The purchase price was DM 30 million.
On November 4, 1998 the Swiss company Agevogel, which formerly acted as an agent for Bayer AG in Switzerland, was acquired for DM 21 million. The company, which also owned the office building of Bayer (Schweiz) AG, was immediately merged with the latter.
In Israel, Bayer purchased interests in two companies specializing in the manufacture of polycarbonate sheeting for industry and agriculture: 25 percent of Polygal Plastics Industries Ltd. was acquired on September 14, 1998 for DM 21 million, and 20 percent of Palthough Industries (1998) Ltd. was acquired on July 6, 1998 for DM 20 million.
Our U.K. subsidiary Bayer plc purchased all the shares of W. Hawley & Son Ltd. on May 29, 1998 for DM 18 million. Hawley is one of Britain’s largest producers and distributors of inorganic specialty pigments for construction, coatings and plastics applications.
On March 31, 1998 our subsidiary Frucade Essenzen GmbH, part of the Haarmann & Reimer group, wholly acquired the KAJO group of Gröbenzell, Germany, thereby expanding its soft drinks licensing business. KAJO will be merged with Frucade in 1999.
The Agfa-Gevaert group wholly acquired the U.S. company Monotype Typography Inc. on July 1, 1998 for DM 18 million. Monotype is among the world’s best-known suppliers of software for fonts.
Significant Divestitures in fiscal 1998
The most significant divestiture during 1998 was the sale at mid-year of the citric acid business to the Tate & Lyle group of the U.K. for DM 400 million.
Also divested was the copying systems business unit of Agfa, which was bought by Lanier Worldwide of the U.S. for DM 295 million.
In addition, 1998 saw restructuring in the inorganics field. Bayer’s titanium dioxide business was placed into a joint venture – in which Bayer holds a 20 percent interest – with Kerr-McGee Chemical LLC of the United States. Our silicones activities were combined in a joint venture with those of GE Plastics of the U.S., with Bayer taking a 49.9 percent share in the new company. The zeolites business was sold to the German subsidiary of the U.S. company UOP LLC for DM 25 million.