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ICI’s $3 BIL. DRUG BUSINESS IS CENTERPIECE OF PROPOSED ICI BIO SPIN-OFF

Executive Summary

ICI's $3 BIL. DRUG BUSINESS IS CENTERPIECE OF PROPOSED ICI BIO SPIN-OFF, which would include ICI's drug, agrochemical and specialty chemical businesses. ICI said July 30 that it is considering a "demerger" of those businesses from ICI's core industrial chemicals business by creation of a separate entity, ICI Biosciences plc. Due to the complexity of the demerger, "no decision to implement these proposals has been taken or is expected to be taken until after the publication of ICI's 1992 preliminary results in February 1993," the company said. ICI's pharmaceutical business, with (British Pound)1.6 bil. ($ 3 bil.) in 1991 sales, accounted for about 13% of total corporate sales but more than half of earnings. Trading profit on the drug business was (British Pound)538 mil. in 1991 ($1 bil.). The units that will make up ICI Bio under the proposal had combined sales of (British Pound)4 bil. ($7.5 bil.) in 1991. Paints, explosives, materials, industrial chemicals and regional businesses would remain in ICI plc. "The division would be designed to enhance the ability of each of the two business groups to meet the very different challenges they are facing, to the benefit of customers, shareholders and employees," ICI said. Several other large chemical companies have spun out their drug divisions in recent years, including DuPont and Dow. "Consideration would also be given to ICI Bio, subject to market conditions, raising new equity capital about the same time as the demerger, by way of a public offer," ICI said. ICI has been rumored to be interested in acquisitions to shore up its $1.3 bil. U.S. drug business; a public offering could provide capital for that purpose. The Wellcome Trust's recent $4 bil. trans-Atlantic offering of Wellcome plc shares could serve as a model for ICI. The spin-off proposal comes as ICI's two major drug brands, the antihypertensive Tenormin (atenolol) and the breast cancer treatment Nolvadex (tamoxifen), face generic challenges. Tenormin went off-patent earlier this year. ICI, however, has been aggressive in maintaining market share by supplying an "authorized" generic version to its IPR subsidiary ("The Pink Sheet" Feb. 17, p. 9). Nolvadex has experienced a late surge in sales due to growing evidence of the drug's breast cancer efficacy. Barr Labs, however, won a patent challenge earlier this year ("The Pink Sheet" May 4, p. 8). ICI is appealing that ruling. The company began considering possible restructurings in 1990, ICI said. In 1991, the British investment firm Hanson plc threatened an unfriendly takeover bid with the intention of dismantling the company. Hanson has since sold all its shares in ICI. If formed, ICI Bio would name David Barnes, currently an executive director of ICI with territorial responsibility for North America, as CEO. Barnes joined ICI as a researcher in the pharmaceutical division and also held Rx sales positions before becoming director of the division in 1971. He then moved into other divisions of ICI before joining the board in 1986. ICI Chairman Denys Henderson would serve as chairman of ICI and ICI Bio. Chief Operating Officer R.C. Hampel would serve as CEO of ICI and as deputy chairman of the two companies. ICI is proposing to effect the spin-off by distributing shares of ICI Bio to current ICI shareholders. S. G. Warburg is advising on the proposal.

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