Zeneca, Astra Announce Merger Plans

This article appeared in the February 1999 issue of PCT Magazine.

On yet another merger involving a major pesticide manufacturer serving the pest control industry, Zeneca, the parent company of Zeneca Professional Products, and Astra, an international pharmaceutical firm, recently announced plans to join forces. The new $67 billion company will be called AstraZeneca and is the latest in a series of high-profile mergers.

The proposed merger occurred within days of the announcement that Hoechst, parent company of AgrEvo Environmental Health, and Rhone-Poulenc, would merge to form the third largest "life sciences" company in the world with more than $45 billion in combined revenues.

What impact will the proposed merger have on the structural pest control industry? According to Karen Dalton, communications manager for Zeneca Professional Products, Wilmington, Del., "There will not be any difference in the way Zeneca serves the marketplace as a result of the merger. It’s going to be business as usual."

SIGN OF THE TIMES. The Astra/Zeneca merger will allow the company to strength-en its pharmaceutical product offerings, becoming the third largest drug maker in the world, as well as dramatically cut costs as a result of numerous operational efficiencies. The company said it would cut 6,000 jobs worldwide during the next three years, resulting in approximately $1.1 billion in cost savings.

Zeneca’s Tom McKillop will become the new chief executive officer of the company, with Percy Barnevik, the former chairman of Swedish-Swiss engineering firm ABB, taking the chairman’s job. The company will have its headquarters in London, while research and development will be based in Sweden. The company’s specialty chemicals business in the United States will continue to operate out of Wilmington, Del.

"Astra and Zeneca are a perfect fit in terms of highly complementary product portfolios, as well as sales and marketing organizations," McKillop said. "A similar management philosophy, together with a strong science-based culture, makes the companies natural partners."

The proposed Astra/Zeneca merger is part of a worldwide trend that produced a record number of corporate mergers this past year. In an interview with the Associated Press, Gregg Polle, co-head of mergers and acquisitions for Salomon Smith Barney, said, "One of the interesting things about 1998 is that you really saw consolidation across the board."

In fact, the 10 largest mergers and acquisitions in history were all announced this past year including Exxon’s purchase of Mobil Corp. ($76.9 billion), WorldCom’s acquisition of MCI Communications ($37 billion) and Daimler-Benz’s merger with Chrysler Corp. ($32.8 billion in a stock swap).

"There’s industry consolidation in virtually every industry including banking, communications, oil and gas, so it’s not too surprising it’s occurring in our industry as well," said Tommy Reeves, president of Oldham Chemicals Co., a pest control product distributor based in Memphis, Tenn.

Are there any more potential mergers on the horizon? "There’s always domestic talk of mergers in the pest control industry," observed Jerry Murphy, president of Cypress Sales & Marketing, Woodinville, Wash. "Mergers are going to keep happening. It’s just a question of whether or not they’re going to affect the pest control industry." Stay tuned.