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Executive Summary

ICI is planning a $2 bil. rights offering as part of its planned spin-off of Zeneca, the company said Feb. 25. Issuing its year-end results, the firm announced that its board of directors has approved the "demerger" of its Zeneca pharmaceutical, agrochemical and specialty chemical subsidiary. "Zeneca will raise approximately (British Pound)1.3 bil. by means of an underwritten rights issue, the net proceeds to be used by Zeneca to reduce its indebtedness to ICI," the firm said. "The overall objective of the equity raising is to ensure that both Zeneca and ICI are appropriately capitalised to enable them to take advantage of their respective business opportunities." Zeneca will have net indebtedness of (British Pound)400 mil. and net assets of (British Pound)1.6 bil. following the rights offering, ICI said. Existing ICI shareholders will receive one share of Zeneca per ICI share as part of the demerger and will be offered a chance to participate in the rights offering. The proposed timetable for the demerger includes issuance of a preliminary prospectus in April, a formal shareholder proposal mailing in mid-May, a general shareholder meeting in late May, and formal demerger of Zeneca in early June, ICI said. The rights offering will commence thereafter. ICI announced its decision to explore a demerger July 30, 1992 ("The Pink Sheet" Aug. 3, 1992, T&G-1). At the time, it said a public equity offering would be considered. Zeneca began operations as a separate entity on Jan. 1 ("The Pink Sheet" Nov. 23, 1992, T&G-2). As part of the demerger and ongoing restructuring, ICI/Zeneca plans to cut 9,000 jobs. "These reductions split about 7,000 in ICI and 2,000 in Zeneca, spread across the constituent businesses and territories," ICI said. ICI took a $785 mil. charge against earnings for "rationalisation costs" associated with the reductions. Severance payments will account for $476 mil. of the charge and asset writedowns and provisions will account for $243 mil., ICI said. ICI's pharmaceutical sales edged up 3.3% to $2.49 bil. Operating income from the pharmaceuticals business declined 8.2% to $751 mil. "in a year which was expected to be difficult," ICI said. ICI attributed the decline in operating income "mainly to the effects of generic competition on Tenormin in the U.S., partly offset by higher sales of all other major products including Zestril, Diprivan and Zoladsx." For the quarter, pharmaceuticals segment operating income was down 19.6% to $193 mil., ICI said. In addition to generic competition for Tenormin (atenolol), ICI cited "different U.S. wholesaler purchasing patterns" as contributing to the decline. ICI corporate sales declined 3.4% for the year, and the company posted a loss of $866 mil. after exceptional charges of $1.44 bil. Income before exceptional items and tax was down 30.3%. The declines were due to "the continuing effects of recessionary conditions," ICI said.

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