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Exhibit 99.4
"ChiRex Inc." ("ChiRex") stockholders are advised to read the tender offer
statement regarding the acquisition of ChiRex, referenced in the following
documents, which will be filed by Rhodia and Cousin Acquisition, Inc. with
the Securities and Exchange Commission (the "SEC") and the related
solicitation/recommendation statement which will be filed by ChiRex with the
SEC. The tender offer statement (including an offer to purchase, letter of
transmittal and related tender offer documents) and the
solicitation/recommendation statement will contain important information
which should be carefully read before any decision is made with respect to
the offer. These documents will be made available to all stockholders of
ChiRex, at no expense to them. These documents also will be available at no
charge at the SEC's website at www.SEC.GOV"
"The following documents include certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current views and assumptions and
involve known and unknown risks and uncertainties that could cause actual
results, performance or events to differ materially from those anticipated
by such statements. Factors which could cause such differences in actual
results include, among others (i) the risk that the Rhodia and the ChiRex
businesses will not be integrated successfully, (ii) changes in the
competitive and regulatory framework in which Rhodia and ChiRex operate, and
(iii) general competitive and market factors on a global, regional and/or
national basis"
Monday, 24 July 2000
This morning, Paris time, we announced the projected acquisition of ChiRex and
we are here today to give you more details about this project. My name is Jean-
Pierre Tirouflet. I am the CEO and Chairman of Rhodia and with me are Jean-
Claude Bravard who is head of the fine Organics Division, Deputy President of
Rhodia, and Pierre Prot who is the CFO of Rhodia.
So we shall discuss this projected acquisition and, first of all, I would like
to tell you a few words about Rhodia, where it stands today, and why we are
foreseeing this acquisition.
First of all, you know that Rhodia was created at the beginning of 1998 and for
two years, during 1998 and 1999, we focused on improvement of our
competitiveness and our performance. You know that at the beginning the Company
was underperforming compared to its peers and through a number of programmes, of
change of culture, of actions, have been trying to change this situation, and
quarter after quarter, I think we demonstrated that we were pushing this Company
forward.
This year we decided to focus on growth. If I take the growth of Rhodia during
the last ten years before 1998 and the same portfolio of products I think we
performed 1.5% a year, which is obviously much too low. Our target is to grow
year after year about 2% over the growth of the GNP in the countries where we
are selling our products, and to focus on growth we are looking in our portfolio
to the area where growth is the most important and in this background of course
what we are doing in life sciences, chemicals and especially in pharmaceutical
chemicals is the segment which is fast-growing and where we want to concentrate
our efforts and resources to become leaders in this area in order to foster the
whole growth of the company. This is the main purpose of this projected
acquisition of ChiRex and now I would like to tell you why ChiRex is interesting
to us and what is basically ChiRex and why it is a significantly growing
business, then Jean-Claude Bravard will develop the interest of the combination
of our own business in life sciences, chemicals and especially in pharmaceutical
chemicals with the one of ChiRex, and then Pierre Prot will detail the financial
consequences of such an acquisition and then we shall try and answer your
questions.
So, first of all, with ChiRex, as you see Rhodia will offer the most innovative
and advanced platform of technology services to the pharmaceutical industry on a
global basis. All the words in this sentence are major and I would like to give
you a little more details:
First of all, the transaction itself: it is a global aggregate purchase price of
around USDM 510 and we shall up to that the debt and come to a global price of
USDM 545. We are offering 31 1/4 USD per share, which is a premium of around 55%
on the last stock market price. It is an all cash transaction and we shall start
the tender offer between now and August 4 and close it by the beginning of
September.
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ChiRex, as we see it, is for us a growth accelerator. It will foster our
position on a fast-growing market and we shall see that it will help us to
acquire a very state-of-the-art level of technologies, that it will add up a set
of capabilities in the market of contract research and the market of contract
manufacturing a pharmaceutical ingredient It will diversify a customer base and
diversify also a Chiral customer base in adding up the two customer bases of the
two Companies ; we shall get a very significant leadership position on a
worldwide basis and it will of course be a significant occasion to foster our
growth - I thinks it's going to add up about 1 % growth to the global sales of
the Company every year and 5 next years and the acquisition will start being
relative in 2002 and be slightly delutive in 2000 and 2001.
What is Chirex ? ChiRex is a leader in pharmaceutical services. One word about
the market it is serving. In fact those are two different markets. First of all,
the market of contract research and, second, the market of contract
manufacturing.
On contract research, the market today is about USDM 250 with a rate of growth
which will be over 25 % per year in the next five years. So, we will probably
get in 2005 a market of around USDM 750.
The market of active ingredient manufacturing is a market which is much bigger,
about USD 30 billion today, with a rate of growth which is going to be around 12
% which will lead to a global market of about USD 23 billion in 2005.
Why 12 % ? Essentially because the pharmaceutical industry, as you know, is
growing around 7 or 8 % a year, and, as you know also, the pharmaceutical
industry is outsourcing its manufacturing more and more. So, adding the two
together, the normal rate of growth from the pharmaceutical industry, plus the
outsourcing, we get to a rate of growth which is going to be around 12 % in the
forthcoming years. So, overall, it is a very attractive market for us and,
overall, we think we can be a major player and increase our growth rate by
being on such undermarket.
ChiRex is a leader in pharmaceutical services. First of all, it is a very
dynamic contract research business. It has a very good research team which is
using a lot of associates from various universities in the U.S. and it has also
a good range of potential technologies and a significant number for major plants
and pilots, which are of course cGMP and state-of-the arts. Of course this
Company is having a very good world class manufacturing system and we hope to be
able to draw a few lessons from their position in the whole of Rhodia in the
forthcoming years. ChiRex is a pure player in pharmaceuticals and this is very
important since a lot of companies that have been purchased in the recent months
or years were having a significant business in the pharmaceutical segment but
none of them was an almost pure pharmaceutical play.
ChiRex is doing about 92 % of its business in pharmaceuticals. And of course
this focus is giving it a very significant competitive advantage since
especially it shares the culture of pharmaceuticals in terms of market
reactivity and efficiency.
Second, ChiRex is a combination of two different businesses. First of all, a
contract research business, which is about 22 % of the global sales of the
Company and where ChiRex is market leader and competes with companies that we
shall see later on, and also a manufacturing business which is about 78 % of the
global
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sales of the Company. The position in those two segments is of course very
efficient. It is very efficient because ChiRex has a unique opportunity to
follow the molecules from the beginning to the end from the very early research
phase till the molecule becomes a drug and is marketed, and it offers this
Company to have a major position in manufacturing when it has started to study
the molecule early on in the process. So, a very continuous process, which is
the result of those main strands of the company. ChiRex, as I said, is the
number one worldwide in pharmaceutical research and it competes with, as you
see, a market share of 11 % with companies like Albany Molecular, 8 %, or
Medichem Research, 7 %, or Oxford Asymetry, 6 %. So, a significant portion of
the market and a good leadership position. And overall ChiRex is a very strong
and growing business.
As you can see here, the aggregate rate of growth between 1996 and the year 2000
has been 23 % year after year. In the year 2000, as you know, there was a
problem with some drugs that ChiRex was supposed to manufacture and which
haven't encountered the kind of success which was forecast on the market and so
the rate of growth has been decreased, but if we look at the rate of growth
between 1996 and 1999 it was, I think, around 40 %. So a very significant growth
rate and we think that this performance, even if we took a very cautious
estimate, will remain in the forthcoming years.
Second, the development sales have been also increasing very rapidly and between
1996 and the year 2000, the rate of growth was around 78 % and we feel it is a
very strong rate which can also be sustained in the forthcoming years even if in
our assumptions we took a lower rate.
So overall it meant an increase in the EBITDA of 17 % per year since 1996 to the
year 2000 and I chose that it is a very fast-growing industry and that we can
add up this growth to the other segments which are growing in Rhodia. So this is
to give you a view of the projected acquisition of Chirex and, as you see, it is
a two-business company : one in contract research, one in contract manufacturing
and now I would like Jean-Claud Brava to tell you how we intend to integrate our
own business with Chirex's and what it means for the whole company.
Jean-Claude :
There is a very powerful combination between both companies. ChiRex is a very
targeted acquisition and because of that there are outstanding synergies between
both companies. And if we look at the different items you will see that the
synergies are pretty good in most of the fields.
First : in development and research Rhodia is European based, Chirex is North
American based - especially with its lab in Boston close to MIT and Harvard.
Chirex has competencies in Chiral chemistry, Rhodia has also competences
Chiral chemistry, but also bring some technology in fine chemical and
biotechnologies. So there is no overlap but clearly synergies.
In terms of the nature of the operation, ChiRex is very developed or performant
in development of pilot Rhodia is stronger in full-scale manufacturing and
industrialization and here also is also a fit.
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In terms of geography, ChiRex is mostly in the U.S. and U. K., Rhoda is really
in Europe plus with some significant antennas in Asia so we'll cover the world
combining the two forces..In terms of customer image, Chirex is very responsive
with a good relation with the client, very reactive, Rhodia brings some
financial strength to the combination and this is also complimentary. If you add
ChiRex's capacity and Rhodia capacity we are close to one thousand cubic meters
of capacity and we will be one of the largest or the largest companies in this
field. So you see in all the fields in terms of development, operations,
geography and industrial, there is a lot of synergy. And if you look we are
always a benchmark in terms of pharmaceutical industry and I explain about top
supply services you can see that we will be leader in both fields, the leader in
contract development and Jean-Pierre will explain what was our rating, we will
be the number one in this development which is a very fast-growing business, a
very performant business and also we will the leader in manufacturing services,
combining both, this will be very complementary and will boost our business by
combining the two skills and this will be quite unique in this industry and we
are very optimistic about this combination which is really outstanding.
If you look at the product life in pharmaceuticals you can see that a
pharmaceutical product starts from discovery and then there is the introduction
of the new drug in phase one - that is the first launch of the product - and
then you have a phase of development and then the new active drug will be
registered and totally launched and then you have the life of the drug.
Through contract manufacturing we will be the leader at the early stage of a
drug and through manufacturing we will follow the life of the drug and having
been competitive on both stages of the life of the drug we believe we will
really have a booster for this business and will be clearly the leader in the
coming years of this business which is a very growing profitable business. And
this is based on a quite unique combination of preparatory technologies.
You have two kinds of technologies : ones coming from Chirex which are in blue
and ones coming from Rhodia which are in green. From ChiRex you can find a lot
of technologies which have been developed by scientific advisors like Professor
Jacobsen, Professor Sharpless, Professor Buchwald and Professor Myers and these
technologies are the top of technologies in terms of ChiRex chemistry
specially linked with some dialcohol molecular for this chemistry.
Rhodia brings other chemistry much more linked with reduction, hydrogenation,
which will bring mono alcohol properties or new other fields like biaril
molecular or cold chemistry. In addition we have some biotechnologies like
enzymaticatalysis.This combination is a very powerful combination because all
these technologies are very advanced technologies, mostly protected technologies
and by combining these twelve technologies we have a real good engine for this
business and this will be very well targeted to the new generation of
pharmaceuticals because 80 % or more of the new drugs today are coming from
specialty chemistry. So we will be the leader on this market and our ambition is
to stay and improve our position on this market and we are very optimistic on
that. And this will be linked with a unique set of capabilities, top quality
team in research - we spoke already about MIT, Harvard, the U.S. University -
with great scientific advisers but we have also in
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Europe significant skills in our research center in Lyon and also good advisers.
So by combining the both, we will have a real top league, team, in terms of
research , Rhodia also has world class analytical competency, analytical is very
important for the understanding of the new chemistry and we will reinforce the
competency of ChiRex through real top, very top analytical competency. In
addition, because we are a large fine chemical company we will introduce new
technology in scale-up and engineering and this will help to put on industrial
scales the very top technology we will combine together.
This is really a booster on a very powerful engine and we will be quite unique
for that. In addition, we will have a very strong commercial structure , Chirex
has already an outstanding customer responsiveness. We will have a very
complementary commercial network, ChiRex buying at present mostly in the U.S.
the U.K., Rhodia adding continental Europe and already some skills in Japan, and
with that we will have a quite outstanding base and with that we will auite
outstanding customer bases. Out of the 40 top pharmaceutical companies will be
our customers. And we will have products for all major therapeutic
classes.Central nervous system, cardio vascular, anti HIV, allergy, oncology.
and some other use. So we will have real real strong panel of customers and our
ambition is to develop this panel and develop our image with them which is with
Chirex starting for already a very high point. In terms of geographical foot
prints, it seems that we were not together but the combination of both is
perfect, perfect on two points, perfect on the development side, because the two
major groups of customers are in the US, North America and in Europe. With this
combination we will have development basis in US through our development centre
of Boston, and Malvern, Pennsylvania, and in Europe through UK based and Lyon.
We will feed very well with the customer base. On the Industrial points the
coincidence is pretty spectacular, because all the four plants will be in a very
narrow radius, and we will be able to develop synergy between the four plants
located in the UK. This will be very powerful because one plant buying more
efficient buying one kind of chemistry, could combine pretty easily with another
plant buying another kind of chemistry. Instead of having plants all around the
world we will have a very strong combined presence of plant in the UK, and this
will be outstanding, and will be of help to be very very efficient and
responsive for the manufacturing to the customer. So you can see that there is
very very outstanding geographical synergies between the two companies not only
in development but also in manufacturing.
So what are we going to do with this business? We are pretty proud of having an
alliance with Chirex because we believe that their style of management in terms
of reactivity and service is pretty good. Our intention is to make a new company
called Rhodia Chirex inside Rhodia group which will capitalise on the asset of
Chirex which by bringing inside the company the Pharmacutical assets and the
competances of Rhodia we have the enthusiastic addition of the Chirex people.
The are convinced just as much as we are on the good synergy between the two
companies and we will build this business around Chirex's structure.
To summarise, it will be a quite unique company, having leadership on
development and manufacturing, on a high growth market, with top proper patented
technology with very high skill. This makes us very optimistic about this new
form of business.
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Pierre will detail the financial impact of the transaction now :-
So what are the financial impacts of this transaction on Rhodia.
First in terms of the price we are proposing. It represents with $31.25 per
share, a premium of 55% over the last quoted price for Chirex last Friday.
So what does that represent? If you take 2001 as a basis of reference, as 2000
is clearly not a relevant year due to the fact that there were some difficulties
with Glaxo Wellcome products. So 2001 represents, according to the projection of
markets for the Chirex results, 11 times a EBITDA and 29 times net earning.
How does this compare with other companies in this area? If you take companies
who are just involved in development, like Albany Molecular or Oxford Asymetry
for example, you will see that both the multiples both in terms of EBITDA and
price earnings are much higher because it is a very profitable business, and may
I remind you that Chirex, as we mentioned are the leaders in this development
area. On the other side if you take companies involved just in manufacturing,
and you see examples of companies, you see that the multiples are a little above
the one of these companies, but these companies are not pure players in this
business.
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In Lonza for example there are some surfactant business.
There are also businesses in pharmaceuticals which are secondary type of
businesses more conditioning, so this explains why the multiples of these
companies are a little lower than the one we're proposing for Chirex..
So globally we think that, at this price, it's a fair price in line with the
quality of the business of the company. If we now look at the synergies, first
the cost synergies, and you see here that we are anticipating no synergies for
2001 which is somehow conservative. We think we can do better but we wanted to
be conservative and take no synergies for 2001, maybe some but they will be
offset by some restructuring provisions so as a first year of fuller impact 2002
will represent 40 million dollars synergies, you see as a split between
manufacturing SG&A and R&D in terms of manufacturing and R&D it's more
rationalisation I would say on the facilities mainly in the UK because as Jean-
Claude Bravard mentioned, all manufacturing plans are in the UK and there are
also some development centers in this country so we can rationalise between
these two companies and get the synergies. In terms of SG&A all significant part
is linked to the corporate cost of Chirex, Chirex is presently a listed company
and a large part of the corporate cost will disappear after this operation. So
that's for the cost synergies. On the other hand we have some significant
revenue synergies linked to the growth and the combination of the two
activities: combination of the technologies enhance scale up capabilities and
combination of the customers, if you add to that available capacities, and here
I wanted just to mention that the capital intensity of this activity is rather
low for that type of businesses because we have available capacities it will be
in the coming years .6 compared to 1.1 roughly as an average for this type of
businesses so we will be able to penetrate the market faster for new drugs which
are in the pipeline and coming to the market and especially in the central
nervous system area or also in the anti-affective area, and we estimated that
the additional revenue linked to the combination of these businesses are the
figures you see here. Of for example 35 million in 2003 but again, and it's
quite also
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conservative nothing in 2001.so if you take an average EBITA margin for these
activities of 30% which is also somehow conservative because it's a marginal
impact and there is also some development activities which is high margin
business we think that we really can count on this type of figure as revenue
synergies.
In terms of impact on the balance sheet you see here a 99 proforma balance
sheet, proforma means after the acquisition of Albright & Wilson which
represented 1.1 billion dollars more in debt, you see that if we add the Chirex
business the gearing which was again on this proforma basis a little above one
will go up to 1.3 but this is before the main divestiture we are anticipating
for this year and this divestiture will bring the gearing down to one the level
before this operation. In terms of coverage ratio, EBITDA and financial charges
it will have no significant impact on the coverage ratio of Rhodia. The total
goodwill linked to this operation represent three hundred and fifty millions
(350) Dollars and we will amortise it over 20 years so as a summary again Rhodia
with Chirex will offer very innovative and advanced platform of technology
services for the pharmaceutical industry that's all the purposes of the
presentation and the consequences will be an increased growth for Rodhia,1 %
more growth for the period 2000 and 2003 which means a change in term of
culture, Jean-Claude explains you how we intend to integrate the business in our
group. It will improve the quality of the portfolio of Rhodia by bringing a pure
specialty type of business with high technological contents it will be accretive
as of 2002, the dilution for 2000 will be roughly minus 3.5 %, 2001 minus 7 %
and starting to be accretive from 2002 and all this together will create value
for our shareholders. Globally on our medium term objectives 2002 and 2003 we
will be able with this operation really to confirm our ability to reach this
objective and we will even do more in term of sale growth due to this
acquisition.
OK thank you Pierre we are now open to questions and so the floor is yours.
Is there any questions from our participants .....
First question come to Miss Jacquins .....
Miss Jacquins from Deutsch Bank: If I could some restart with some qualify
questions, you very quickly see the advertise of the goodwill you were taking
for the acquisition, was it 350 million Euro or 350 US dollars?
Its dollars,
The second one was in term of the time, just one check 20 years?
Yes 20 years, yes the assumption we took in terms of amortisation period.
So I didn't catch that.
Yes its 20 years for amortisation and the terms of the amount was it Dollars or
Euro.
Its Dollars.
OK in terms of charges should we be expecting charges for integration of Chirex,
so these charges are incorporated in goodwill figures for everything related to
the Chirex perimeter and a part from that we are expecting some minor
restructuring provisions that will occurre most probably beginning of 2001 which
will represent in the range of 3 to 5 millions dollars.
Ok are you going to detail out the restructuring charges that you are taking
within goodwill.
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Sorry....
Will you be detail the charges that you adding into the goodwill number ?
Into the goodwill number so we have been taking into account some restructuring
charges which are not very significant, it's in the range of 10 million
dollars, I would say.
Ok, and also I haven't seen anywhere exactly when you are going to forecast or
actually factoring in the first consolidation. It is the fourth quarter 2000.
Yes, it will be beginning of fourth quarter 2000.
And in terms of, you say you are going to start or form a new business Rhodia /
Chirex, will that be still within fine organic ?
Yes it will be part of fine organic and we will separate it from Building
blocks, it will be realised as legal entity
Ok two more questions, if I may, the first one is within a number of concerns of
the Deutsch Bank forecast looking for some big growth to come through in Chirex
given by basic new products from sharing.
Are you in terms of consensus of Chirex is Rhodia having done all their home
work on the deal happy with those consensus numbers. Do you feel more
optimistic?
We have been in this operation much more prudent than you financial analysts in
general that is the perspective of Chirex . That's the data you have seen from
Pierre in term of future synergy and relation are very conservative "vis a vis"
the consensus of the financial analysts today.
OK and the final question was within the presentation pack you talk about this
acquisition adding 1% to the group sales. How is that calculation done because
obviously adding in the sale from Chirex is only a small proportion relation to
Rhodia. So how is that acquisition add 1%? to total group sales ?
So it's linked to the growth of the business we are anticipating from combining
these 2 activities and I mean for the period for 2000 and 2003 according to the
growth are anticipating it will represent 1% more growth globally for Rhodia
even for this as you say rather small business compared to the size of Rhodia
for this period due to the very significant growth we are expecting for this
period, by this combination.
Thank you very much
To just add a point comment on what have been answered basically we have been
doing due diligence and we are very comfortable with the forecast we are
providing today even if they are more conservative.
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OK, the next question please
Next question comes from Mr. Stone
From Franck Stone, HSBC in London. I had a couple of related questions, really.
Firstly in regard to what the current capacity utilisation is in the contract
manufacturing plans in the UK. I think a comment was made some months by Mr
Griffith of Chirex about the capacity realisation in the Annan plant in Scotland
was actually below 50 % I think he made that statement before Glaxo scaled back
on their commitment from that plant. Second related question really was at the
time of the Annan that acquisition it was totalled by Chirex that combined it
would be 5 years 450 million dollars supply agreement from Glaxo, obviously a
scale back, I think 28 million sales of sales from Glaxo, since then for 2000,
they are given additional contracts was seven and half million dollars and the
Chirex earlier this year, if you could clarify for me where we stood on a
comparable number to that 450 million over five year from Glaxo.
That's obviously question we have been looking at very thoroughly, so Jean-
Claude will comment on that.
Concerning the capacity utilisation it's clear that the capacity utilisation of
Chirex is far to be 100% today, we have a number of development in progress and
we are able to leverage the technology through our industrial and scale up
technology, we have a good prospective to accelerate the feeling of this plant
and with very conservative hypothesis we are pretty confident that the capacity
will be much better in the coming years. Concerning Glaxo, Glaxo is a company we
have been meeting discussing before jumping into this deal. We met them, we had
good discussions with them and we are pretty confident that our relation with
Glaxo will develop not only with existing products but also with other products.
But once again, I want to add is you have seen that the combination of both
companies Chirex and Rhodia enlarged significantly the number of customers and
our expectation is to grow the Glaxo's business and Glaxo is a very important
customer for Rhodia/Chirex, but other customers will be added or will go in this
range. So we are pretty confident on the Glaxo relation and we are very
optimistic about the panel of customers that Rhodia/Chirex will develop.
Thank you
Still appropriate to use that 450 million dollars over 5 years some ___________
28 million that was talked about, earlier as a guide for the business from
Glaxo going forward.
At this stage, I would not comment Glaxo relation as long as a deal is not done
I prefer that the Chirex management comments it, the only comment I can make is
we have checked and we are confident.
Thank you
Next question
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Next question from Mr. Heastwood
I just have a couple of questions, what interest me is how do you expect on a
debt you are going to be using and secondly to follow up on the Glaxo question.
There is a risk of large customers. How much do Glaxo compare from now the next
three or four customers after that?
On the first question, the assumed interest rate we took in our calculation is
7.5% and the question was the importance of Glaxo in the range of customers of
Chirex today, I believe what was given by the management is around 40% or
something like that and its clear we want to maintain and develop this turnover
and we will also other customers. I want to repeat that 30 out of 40 top
pharmaceutical industry will be out customers and we will keep very good
relation and developed relation with Glaxo but we will also enlarge our panel of
customers which will diminish the sensitivity of the company.
Could you just tell me what size the second largest customers is.
I have not the detail here now, I cannot comment.
Thank you, next question please,
From Mikael Emond, When the period initially opens, is it going to be open
for 20 business days.
Yes
Next question from Mikael Cockling - can you give me a little bit of the history
of the transaction are you going to scale together and also will you be needing
regulatory approval and I know imagine you have done a lot of due diligence. Is
due diligence complete, and is there a break up fee?
I don't think we can comment too much on the history of the transaction today, I
can tell you that we will seek the normal and authorities approval? The Hart
Scott ready known in the US, I don't think we need due to the amount stake any
approval from the E.C. but we shall seek approval in the various countries of
the European Union where necessary and the last point was breakup fee and due
diligence complete. Yes there is a breakup fee and the diligence have been
completed.
What's the breakup fee ?
Its 17 million dollars
And do you know what countries you will need to get regulatory approval?
Yes, essentially, Germany, I guess, and few other European countries but we
don't anticipate any problem.
OK Thanks
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From Richard Hown, you mentioned that you have earlier spoken to Glaxo, your
larger customer I was just wondering do you have to speak to some other larger
customers such as Rohm & Haas and essentially to get their approval for the
merger.
We have taken a significant number of guarantees and I don't want to comment in
detail, what I can tell you is we are pretty sure and the key people in the
management will come with us, we have the assurance they will come and we have
also good assurance that the key people in term of scientific advisers will come
with us. So we have taken all the guaranty to give to the customers the maximum
insurance that the service will be the same, at least the same and we have taken
all the guaranties that there will be not be a problem. But I don't want to get
into the details too much.
Thank you
Next question: from Mr Saloman Feared, Lehman Brothers, I had a couple of
questions or numbers of them. The first one, I missed was addressed in the
presentation plan by Mr. [Tirouflet, Bravard, Prot] what is the size of Rhodia
business, which compares directly with the Chirex business you are taking over?
The business that we shall contribute to Chirex will be about 40 millions
dollars sales.
OK Thank you. What proportion of Chirex sales have actually come through the
start finish association with Pharma Companies so far?
Can you repeat the question, please.
Yes, I wondering how successful today the big start commercial has been , and
what proportion of Chirex sales have come through that route?
I think that it is difficult to answer, but, that the majority, having the
development inside the company is a very significant advantage because they
ensure an overall efficiency to the customer. Overall our target is not to have
100% of the development going into manufacturing because we clearly want to
afford the best available performance to the customer. In a few cases there may
be that the development technology cannot fit in our manufacturing plant. So our
intention is to have a significant amount of development feeding the
manufacturing but saying that it will be 100% is unrealistic, and unfair to the
customer, and its not our target.
I have couple of questions on the Shareholdings?
What is the insider ownership of Chirex? How much does the management have?
Pierre
So there will be some exercise of stock options, and roughly management's after
exercise of the stock option linked to this operation , will hold 2million
shares on top of the 15.2 outstanding shares
12
<PAGE>
Ok so the total number of shares you will buy is something like 17 and there
will be some cash out of options. Is that what I understand?
Exactly. Exactly that is true.
Ok
Can you just clarify what you were saying about disposals please as well? Which
I assume is Rhodia Ster. But can you elaborate?
What has been said about disposals is that as you know we have a few projects
of disposals that are undergoing for the time being. One is the Brazilian
polyester business which has been postponed last year and which has been re-
opened in the first half. The second one is the disposal of the surfacting
business that we found in Albright & Wilson, which is also on its way. So what
we said is that at the end of the year after those disposals we should come back
to the level of indebtedness that we had at the beginning, just after the
Albright & Wilson acquisition, which is around one equity for one debt.
Thank you very much!
Thank you our next question today comes from Miss Ashurst! Please go ahead
announcing you company name
Hello, it is Jackie Ashurst of Goldman Sachs here. Just a couple of things. Can
you give us a little more background behind the pullback on the Glaxo sales in
the first quarter and how much is residual impact there may be on the second.
And the second question was you gave us a lovely pie chart estimated market
shares in contract research. Can you just give us your assumptions on market
shares and manufacturing please?
Jean Claude
On Glaxo sales, I don't have the details, but if you look at the publication
given by present management of Glaxo, my feeling is that you will find a lot of
detail and much better explained than by me, because I was not in this period.
So I want to encourage you to look at that because I cannot comment on the past
and I'm not aware. The only thing I want to repeat is that we have had a good
discussion with Glaxo, and we have taken this into account in our prospective is
the consequence of this discussion and we are not anxious, but we are much less
anxious than you on the Glaxo problem.
Ok
And the second point was market share in terms of contract manufacturing. I
cannot, but we will be one of the leaders. We will rank in the top three. we
believe I have not the exact number of market share, but we will be in the top
three of the contract manufacturers.
Thank you
<PAGE>
I guess that we shall have around 6% in this market, no? No sorry.
Thank you
Our next question comes from Miss Bolchard!
Please go ahead announcing your company name
La Tribune. How are you financing the deal is it only debt? and could you tell
us again the benefit of Chiral chemistry? What is so good about it?
For financing, it will be debt. We will use our existing credit lines , and both
in dollars and sterling pounds. You have two ways to answer this question. One
way is to say that we will increase debt, one way is to say that we shall
finance the acquisition by this the divestiture that are going to occur in the
second half. So take it as you wish!
So that the divestiture is really happening this year? Because we have been
waiting for it for three years I think now!
No, you have been waiting, and you remember that last year we decided to
postpone one , and the second one has been launched, so I think that it is going
to come this year.
On the second point chiral Chiro chemistry, you have two kinds of molecules,
chiral one is the Chiral molecule. Chiral molecule is composed of parts which
are called anantiomers, which are not superposable, which means that one is as
if you wish as your left hand, and one is like your right hand, and to have the
properties of the molecule you have to separate the anantiomers, to keep only
the one efficient, the other one could be neutral or even negative. So the Chiro
chemistry is aiming at separating in the most efficient fashion those two
anantiomers, and you have to know that the number of pharmacutical molecules in
the world are Chiral, and today about 80% of new drugs are Chiral.
But why because it has specific properties? Is it more efficient?
It is more accurate, and so it's more efficient.
Allright, Thank you.
Thank you, our next question comes from Andrew Gunnet. Please go ahead
announcing your company name!
Hi its Andrew Gunnet, of West Broadway partners in New York.
Two questions? How come Chirex makes more sense for you than another company,
like a Camrex?
Well, Camrex is a larger company, and less focused company. Chirex for us is a
very good fit, because it is essentially more than 92% in pharmaceutical, and is
precisely
<PAGE>
what we are looking for, and their technologies are very complimentary to us.
Camrex is a bigger company , but is less focused than Chirex
I see,. and you have just done the Albright and Wilson, now you have Chirex.
Clearly your management team is fantastic and you have turned around Rhodia,
but you have got a lot to handle here on the integration side. How do you plan
to do that?
Well, you know that we have those two acquisitions are right in our portfolio of
businesses and one is in the surfactant business, and the other is in the
pharmaceutical chemical. They are in very different parts of Rhodia, and we
shall demand a lot to the present team of Chirex, since as you understood our
idea, is to take the assets and people that we have in this pharmaceutical
business, and to contribute those assets to Chirex team. So I don't think it
will be an integration, which will be as demanding as the Albright & Wilson
acquisition. I think it will be left in a pretty autonomous fashion at the
beginning, and then we shall try and drive some input on the other parts of
Rhodia for the culture, and the skills of this team. That's the way we see it,
and we don't think it shall be over weighting the management of the company.
And then , when I look at your entire business portfolio, it seems to me that
you have a few businesses growing at 25% on the top line, but still many more
businesses growing at 12%, and as you mentioned that over 2% over GNP in the
countries. It seems to me that there are still a couple of companies missing
that you probably have to fit in. Is that a fair statement?
Well you know,. I think there are two answers to your question. First answer is
that I think we have a lot of resources internally, that we haven't yet
mobilised in order to foster growth. I think this is more of a state of mind
and that people today are focusing much more on growth. I take an example, I
take the engineering plastic business. Today you know, we just launched a new
kind of plastic called "Technistar". This new plastic with a different structure
will probably boost this business to the point where we shall grow at 12-15%
which was not envisioned a year and a half ago. I think that we can do that with
a lot of businesses in Rhodia, and so foster our internal growth. If we find
opportunities we shall look at them, but for the time being we do not have any
significant project of acquisition on our plate. So lets digest this one. Of
course we may have some dreams, but for the time being, I think it is a bit
early to look at that.
Ok, the last question?
Clearly Chirex is an interesting business for other people as well, some of whom
have even greater financial resources than Rhodia. How much are you expecting to
really pay here? In other words, Is your bid calculated to keep away other
interlopers?
Look, I think that we are paying a full and fair price for this company. This
bid has been agreed by the board of Chirex, and so I hope this will go smooth!
Sorry, the board of Chirex has approved the transaction?
Yes
<PAGE>
And management is committed to voting their stake?
Yes, I understand! Ok thank you
Thank you very much!
Thank you, our next question comes from Stephan Laurent. Please go ahead Sir
announcing your company name.
Thank you very much my questions have been answered.
Thank You. Our next question will come from Robert.Willoughby Please go ahead
Sir, announcing your company name.
Next question is from Mr Tillier. Please go ahead Sir announcing your company
name.
Yes, this is Alan Tillier, journalist with the Daily Deal of New York. It's just
a very journalistic question about the total price about the press communique
talks of 510 million, I think. Mr Tirouflet also mentioned 545 million at the
beginning. I just wanted to clear up these two figures.
Good question. I mentioned the two prices: 510 is the price we are paying for
the equity and we have to add up the debt of the company which is about 35
million dollars which is coming up to this 545 that we are talking about.
Thank you, sir.
Thank you.
Thank you. Our next question is from Mr Dyer. Please go ahead Sir announcing
your company name.
Good afternoon. Dwyer from Merrill Lynch here. I've got a couple of questions.
First one is on this Glaxo issue again, I'm afraid. According to Chirex's 10-K
at the end of '99 they contributed something like 59% of the revenue. What is
your anticipation for supplying Glaxo when the Supply Agreement contract comes
to an end in 2002? And secondly, can you give us a breakdown of Chirex's
portfolio in terms of where the products are in their various stages of
development?
Well, on the first question, I think we have already extensively discussed this
situation and I don't think we can give forecast on that matter nowadays. We can
come back on this after the acquisition if you like but for the time being I
think it is premature and what I can tell you is that we want to foster the
relationship with Glaxo but at the same time as we are enlarging the number of
customers and the customer bases by adding up our own ones across all the
projects that are in development in Chirex, I think the share of Glaxo in the
total customer base will probably be regularly decrease even if we fostered the
relationship with Glaxo. But I cannot tell you today what exactly is going to be
the situation by the end of 2002.
<PAGE>
On your second point, maybe Jean-Claude? The various products in the different
development stages.
Yes. What we can say is that there will be about 50 products, between 40 and 50
products in term of development. Here you find all the range from 5.1 to 5.4 and
there is a significant number of products which are after phase two that means a
probability they stay at a large scale. We are dealing with a significant number
of customers. I told you we are dealing with thirty or forty and we are pretty
confident of the quality of the portfolio with a repartition between phase one,
phase two and phase three. The product which are reasonably having a good and it
is significant, the portfolio is very well spread and of very good quality.
You can't give us any further details on what percentage are monitored and what
percentage are in phase three specifically?
We don't comment on products. I can tell you it is very well spread.
Okay. Could I ask a final question on the technologies, the proprietary
technologies that you've got? Have you got exclusive licences on these things
and particularly the Jacobsen and Sharpless technology or are those academics
allowed to go out and act as consultants.
Can you speak slower?
Yes, sure. Could I get clarification on the particular proprietary technology
that you've got? I'm particularly interested in the Jacobsen and Sharpless
technology. Have you got exclusive licence and exclusive use of those
technologies? Or are Professors Jacobsen and Sharpless allowed to go out and act
as consultants to the pharmaceutical companies and talk about their technology?
No, we have exactly the same situation . we will have exactly the same situation
as Chirex today. That means we will have the priority on this technology and
they will not be allowed to sell this technology outside Rhodia Chirex. It is
the same situation and we will maintain the status quo and we want to develop
some relation with this scientific advisor which are very key and we want to
give them an opportunity in a large scape, scale sorry, to develop their skill.
So, we maintain the present situation.
Okay, thank you.
Thank you.
Thank you. Our next question is from Miss Goldthrum?. Please go ahead Madam
announcing your company name.
Liliane Goldthrum from BNP Paribas Asset Management. Would you explain why it
was necessary to initiate an expensive bid to provide services to the companies
you already supply? I don't understand very well.
We are not supplying exactly the same company. What is very outstanding it's
the biggest customers for Rhodia are not the same as the biggest
<PAGE>
customers for Chirex. So, in fact we are not supplying the same customers, we
are adding the customer panel, it's very additional and what will be very
powerful is leverage. We will leverage Rhodia technology to Chirex customer and
we will leverage Chirex technology to Rhodia customers. So it's really a very
great chance. We are very complementary including in terms of customers.
So you think you could not expand on your own forces?
No, we can always expand on our own forces but if you start with the much larger
bases and if you add more technologies, obviously you may have a much better
position worldwide and a better rate of growth overall so which we are trying to
do with this acquisition is to get a leadership position worldwide ranking
amongst the best companies in this area by adding up the two forces since we are
very complementary as Jean-Claude explained. At the same time in terms of
technology and in terms of customer bases the overlap is limited and the
complementarities are strong. So we think that we can build up a very strong
business very quickly. If we had decided to remain alone I think we had our own
technologies. We could build up on those technologies but of course it would
have been taking much longer to become one of the major players worldwide.
Okay, thank you.
Thank you.
Thank you Anne.
Last question today comes from Mr Rona. Please go ahead Sir announcing your
company name.
Yes, good afternoon. My name is Philip Rona calling from Picta in Geneva. My
question is very brief. I look at Chirex sales in '99 of 146.9 million. If I add
that and another 40 million from Rhodia which is stated before we come to
roughly to about 200 million in sales. Could you give me a comment as to how
much of that is in the US?
To be clear, a big part is in UK and probably US is the second market but I
don't have the exact percentage. But in market ranking, first is the UK, second
is US. I have not the number but the US is significant.
Okay. Just to follow up on that then from Chirex figures it is really small the
US although it's a quoted company in the US if I'm reading this.
Yes, but it is growing with its development center in Boston and Malvern.
Malvern is not a very old acquisition so US is growing pretty fast.
Okay. Do I understand correctly then that the exclusive contract business is
about 200 million . . for the combined group?
It will be lower because, as you know, the Chirex turnover will decrease in 2000
because of some reduction with the Glaxo sales. So what we intend is to have a
<PAGE>
decrease in manufacturing and still progression in development. But this has
been taken into account in our forecast.
Thank you very much.
Thank you.
So, I understand this was the last question.
We now have one further question which comes from Miss Ashurst. Please go ahead
Madam.
I apologise. It's just a clarification I couldn't hear earlier on. Will you be
putting the acquired business within fine organics or not? I couldn't catch your
answer.
Yes, Jackie we shall put this business within fine organics but we want it to be
autonomous compared to the rest of the division and the rest of Rhodia. And
so, we shall use a different process than the one we used for example with
Albright & Wilson. We keep Chirex as it is and will contribute assets and people
in order to form a pharmaceutical chemical business which is gonna be by its own
for quite a long time.
Okay, so you'll have three segments within fine organics effectively?
Yeah, in fact, we'll have three segments. We'll have the now what we call the
perfume and specialties, we'll have the analgesics business and pharmaceutical
ingredients and we'll have this life sciences business.
Okay, thanks very much.
Thank you very much.
So, thank you very much to you all for attending this presentation. If you have
further questions, of course, we are at your disposal to answer them. And thank
you very much for attending.
Bye Bye
