Rhodia to acquire Chirex USA

Rhodia SA (Paris, France) has signed a definitive agreement to acquire Chirex Inc. (Stamford, CT), a custom pharmaceutical product development and manufacturing firm, for approximately $545 million. This includes $510 million in cash plus assumption of debt.

"With Chirex, we gain an immediate leadership role in the pharmaceutical contract research and contract manufacturing services arenas," says Rhodia chairman/CEO Jean-Pierre Tirouflet. He plans to merge Chirex with Rhodia's growing pharmaceutical development operations, which the company began acquiring in 1998. The new company, Rhodia-Chirex, will specialize in pharmaceutical development.

Chirex provides integrated contract process research and development and contract manufacturing services to pharmaceutical and biopharmaceutical companies. Its development division provides services ranging from drug discovery and process development through manufacture of material for clinical trials at four cGMP facilities in the United States and United Kingdom. It manufacturing division makes bulk active ingredients at two cGMP plants in the United Kingdom.

According to Rhodia, outsourced pharmaceutical process R&D is a $250 million industry growing 25% annually. Outsourced drug chemical manufacturing is a $13 billion business growing 12%/yr.

Rhodia says Chirex is the world's largest provider of contract research services with an 11% share of the $250 million market. Its major competitors include Albany Molecular (8% share), Pharm-Eco Labs (7%), Medichem Research (7%), and Oxford Asymmetry. Its competitors on the contract manufacturing side include DSM, Lonza, Cambrex, and Catalytica.

Chirex's strengths in research promise to mesh well with Rhodia's existing business. The latter's strength lies in full-scale contract manufacturing of fine chemicals and biochemicals.

"The Chirex operating management team will form the core of the new enterprise," says Chirex chairman/CEO Michael A. Griffith. The new company will also have access to Rhodia's R&D organization, including dedicated pharmaceutical process chemists in France and the UK, and low-cost capital.

"Customers will also benefit as the Chirex proprietary process chemistry portfolio is enhanced by the addition of Rhodia's complementary technologies and by a substantial increase in resources and investment," Griffith continues.

"For example, the chiral building block program can be commercialized more rapidly and on a significantly larger scale, due to Rhodia's significant distribution channels." He notes that the company received more than 300 inquiries to buy its chiral building blocks during the first half of 2000. The company also introduced 12 new products this year.

Under its merger agreement, Rhodia will pay $31.25/share in cash for Chirex stock. The company plans to begin its tender offer by August 4, 2000. It expects earnings to become accretive by 2002.

Chirex was advised by Chase Securities Inc. in this transaction. Rhodia was advised by Bear, Stearns & Co. Inc.