Merger of Businesses with Novartis - Part 2
AstraZeneca PLC
2 December 1999
Part 2
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN OR INTO AUSTRALIA, CANADA OR JAPAN
LAUNCH OF A GLOBAL LEADER IN AGRIBUSINESS
AstraZeneca and Novartis Announce Spin off followed by Merger of Agribusiness
Activities
* First global, dedicated agribusiness company
* No. 1 in crop protection and No. 3 in seeds with USD 7.9 billion
in combined 1998 sales
* Unparalleled global marketing capability across crops and
regions
* Outstanding R&D platform to lead innovation in a rapidly
changing industry
* Estimated net merger-related cost savings of USD 525 million
1. Introduction
The Boards of AstraZeneca PLC ('AstraZeneca') and Novartis AG ('Novartis')
announce that they each have unanimously agreed to spin off and merge
AstraZeneca's agrochemicals business ('ZENECA Agrochemicals') and Novartis'
crop protection and seeds businesses ('Novartis' Agribusiness') (the
'Transaction') to create the world's first dedicated agribusiness company
with combined sales in 1998 of USD 7.9 billion. The new company will be
named Syngenta AG ('Syngenta'), headquartered in Basel, Switzerland, and
will be listed on the Swiss, London, New York and Stockholm Stock Exchanges.
AstraZeneca Shareholders will receive 39% of the shares of Syngenta and
Novartis Shareholders will receive 61% of the shares of Syngenta. Novartis'
Animal Health business and AstraZeneca's 50% holding in Advanta are not
included in the Transaction.
Heinz Imhof, currently Head of Novartis' Agribusiness, will become Chairman
of Syngenta. Michael Pragnell, presently CEO of ZENECA Agrochemicals, will
become CEO.
AstraZeneca and Novartis have entered into a binding agreement to create
Syngenta. The Transaction is conditional, inter alia, on the shareholder
approvals of AstraZeneca and Novartis and receipt of relevant regulatory
clearances. Completion, and the listings of Syngenta, are expected to take
place in the second half of 2000.
2. Combined Business of and Strategy for Syngenta
Unparalleled Global Marketing Capability Across Crops and
Regions
Heinz Imhof, Chairman designate of Syngenta, commented: 'The creation of
Syngenta marks the most exciting milestone in the history of both businesses.
The combination will allow us to create a leading high performance company
with an excellent competitive position providing the base for a sustainable
increase in shareholder value.' Michael Pragnell, CEO designate of Syngenta,
said: 'ZENECA Agrochemicals and Novartis' Agribusiness are an ideal fit with
complementary product portfolios and a strong international sales and
marketing culture. Syngenta's unique focus and its outstanding science
base will enable it to enhance value creation in agriculture at
a time of substantial industry change.'
The development of the new company will be based on the combination of the
largest global sales and service networks with the broadest and most
attractive product portfolio in crop protection and a leading position in
seeds. Syngenta will build on the most profitable crop segments to create
and capture increased value in the agribusiness food chain through
accelerated innovation, to meet the needs of growers, processors and
consumers.
Global Presence
Based on combined total sales of USD 7.9 billion in 1998, Syngenta will be
ranked as No. 1 in all major regions and will have a presence in over 100
countries. Combined 1998 sales were USD 2.9 billion in NAFTA, USD 2.9
billion in Europe, USD 1.1 billion in Latin America, USD 0.8 billion in
Asia/Pacific and USD 0.3 billion in the Rest of the World.
Broad Product Line
Syngenta will be the first global 'pure play' agribusiness company. Based on
1998 combined sales, the new company would rank No. 1 in the crop protection
market with leading positions in herbicides, fungicides and insecticides, a
No. 2 position in seed treatments, and a No. 3 position in seeds. Crop
protection will contribute USD 6.9 billion (87% of the business) and seeds USD
1.0 billion (13% of the business).
In crop protection, combined 1998 sales by major market segments were
USD 3.5 billion in herbicides, USD 1.7 billion in fungicides, USD 1.2
billion in insecticides and USD 0.6 billion in seed treatments and others.
The crop protection products include: the selective herbicides Bicep
Magnum(r), Dual Magnum(r), Fusilade(r), Surpass(r) and Topik(r), the
non-selective herbicides Gramoxone(r) and Touchdown(r), the fungicides
Amistar(r), Bravo(r), Ridomil Gold(r), Score(r) and Tilt(r), the
insecticides Curacron(r), Force(r), Karate(r), and Vertimec(r), and the seed
treatment products Celest(r) and Maxim(r).
The launches of several new products, such as the fungicide Flint(r), the
insecticide Actara(r) (which is also marketed as the seed treatment product
Cruiser(r)) are currently underway in major markets. Additionally, a number
of late stage development crop protection products are scheduled for launch
in the coming three years including the new corn herbicide mesotrione ZA
1296.
In seeds, 1998 sales were approximately USD 1.0 billion. Syngenta will have
leading brands in several crops including NK(r) Corn, NK(r) Soybeans, NK(r)
Sunflowers, Hilleshoeg(r) Sugarbeet, S&G(r) Vegetables, S&G(r) Flowers and
Rogers(r) Vegetables.
Outstanding R&D platform to lead innovation in a rapidly
changing industry
With a combined l998 R&D investment of approximately USD 700 million,
Syngenta will have a strong innovation platform in chemistry and plant
biotechnology with the leading team of scientists in the industry and the
potential to exploit new economies of scale. These innovative capabilities
will include dynamic programs in invention, synthesis, screening, breeding,
gene technology and genomics. These new technologies are critical as
agribusiness goes through a period of substantial change.
Tomorrow's products will increasingly be centered on crop input and output
traits as well as advanced crop protection chemicals. Syngenta's discovery
activities will contribute to the development of high-value products, which
will enhance the production of safe, healthy and high quality foods, feed,
plants and plant derivatives. Major international research centers are in
Berkshire UK, Leiden in Holland, Richmond and La Jolla in California,
Research Triangle Park in North Carolina and Basel and Stein in Switzerland.
Significant Merger Related Net Cost Savings of USD 525 Million Pre-tax by
the Third Anniversary of Completion of the Transaction
Syngenta management expect that the Transaction will generate net annual
pre-tax cost savings of approximately USD 525 million per year. Around 40% of
the total savings are expected to come from a rationalisation of selling,
general and administrative expenses, with the balance from leveraging the
combined R&D platform, as well as rationalisation of manufacturing, supply and
distribution. It is planned that 30% of the total cost savings will be
achieved within 12 months, 70% within 24 months and 100% within 36 months from
completion. The cash restructuring charges associated with the USD 525
million savings are estimated to be USD 850 million, including USD 100 million
for completing the Transaction. These costs will be borne by Syngenta. The
amount of asset write-offs has yet to be determined.
Management's estimates of the cost savings include a reduction of
approximately 3,000 in the combined worldwide crop protection employee base.
All changes will be implemented in a socially responsible manner over three
years following completion.
The net cost savings of USD 525 million are additional to the cost saving
programs announced since mid-year by both companies, which will continue as
planned, and are expected to lead to USD 100 million in annual cost savings.
AstraZeneca's share of these planned savings amount to USD 50 million and
includes approximately 600 job reductions, of which 450 were announced with
AstraZeneca's nine months results. The costs of achieving these previously
announced programs will be borne by the respective parent companies.
The cost savings will enable an organisational structure to free up
resources for value creating activities.
3. Key Financials
The published accounts of Syngenta will be prepared in US dollars in
accordance with International Accounting Standards (IAS) and with US GAAP
reconciliation. The combination is expected to be purchase accounted as an
acquisition of ZENECA Agrochemicals by Novartis' Agribusiness.
For the financial year ended 31 December 1998, the combined total sales of
Syngenta were USD 7.9 billion and combined EBITDA (earnings before interest,
tax, depreciation and amortisation) were USD 1.6 billion. Combined research &
development investment in the same period was approximately USD 700 million.
Summary financial information on ZENECA Agrochemicals and Novartis'
Agribusiness is set out in Appendices 2 and 3. The information has been
derived from management information of those businesses and is consistent
with the segmental analysis contained in the respective audited annual
accounts for 1998 and the unaudited interim financial statements for the six
months ended 30 June 1999.
The combined total number of employees at the end of 1998 was 23,500, with
19,200 in crop protection and 4,300 in seeds.
4. Positioning in Capital Markets
Syngenta shares will be listed on the Swiss, London, New York and Stockholm
Stock Exchanges and it is expected that Syngenta will be included in the
Swiss and Swedish indices.
Syngenta is targeting an optimal capital structure which will enable a solid
investment grade rating. Third party funding is targeted at a total of
approximately USD 3.5-4.0 billion, and will enable Syngenta, as it judges
appropriate, to undertake a repurchase programme of up to 10% of its shares
in the period shortly following completion, and refinance parental debt.
The future dividend policy of Syngenta will be developed by the Board of
Syngenta and will be communicated to shareholders at the appropriate time.
5. Corporate Governance
Heinz Imhof will be Chairman of the Board, which will consist of 12 members,
of which 6 have been nominated by Novartis and 6 by AstraZeneca.
The Executive Committee will be a 8-person management team, including 4 from
Novartis and 4 from AstraZeneca. Michael Pragnell will assume the post of
CEO, while COO Crop Protection will be John Atkin (N) and COO Seeds will be
Jeff Beard (N). Chemical Operations/Global Supply will be headed by Bruce
Bissell (AZ), Research and Technology by David Evans (AZ),
Planning/Business Development by David Jones (AZ) and Legal/Taxes by
Christoph Mader (N). Richard Steiblin (N) will become CFO.
Syngenta's corporate governance principles will be consistent with the
requirements and best practice of the major capital markets where it will be
listed.
6. Terms of the Transaction
In a first step, AstraZeneca will spin off its agrochemicals business (ZENECA
Agrochemicals), and Novartis will spin off its crop protection and seeds
sectors (Novartis' Agribusiness). Immediately following, these businesses
will be merged to form Syngenta. Further details of the Transaction process
and the Master Agreement are given in Appendix 1.
Based on the current number of AstraZeneca and Novartis shares, Syngenta will
have approximately 111.7 million registered shares outstanding. Shareholders
of Novartis will be offered 1 share of Syngenta at the nominal value of
CHF 10 for each share of Novartis held, and AstraZeneca's Shareholders will
receive 1 share of Syngenta for every 40.83 shares of AstraZeneca held. The
final exchange ratio between AstraZeneca and Syngenta shares will be
determined at the time of completion of the Transaction. Fractional
entitlements to shares of Syngenta will not be issued to AstraZeneca
Shareholders as part of the distribution. Arrangements will be made for them
to receive cash for such fractional interests in pounds sterling, US
dollars or Swedish kronor.
7. Timetable and Other Matters
The Transaction is expected to be completed after all necessary shareholder
and regulatory approvals have been received. Circulars setting out details
of the Transaction and documentation in relation to the proposed listings of
Syngenta will be sent to AstraZeneca Shareholders and Novartis Shareholders in
due course. The shareholder meeting for AstraZeneca will take place on 26 May
2000 and for Novartis on 12 April 2000.
Subject to receiving the necessary clearances and shareholder and other
approvals, it is anticipated that the Transaction will be completed in the
second half of 2000. Should actions be required by the regulatory
authorities, any proceeds would be retained within Syngenta with no
adjustment to the terms agreed between AstraZeneca and Novartis.
8. Board Approvals
The Boards of Directors of AstraZeneca and Novartis have approved the
proposed Transaction and have been advised by CSFB and Goldman Sachs (acting
for AstraZeneca) and Morgan Stanley Dean Witter (acting for Novartis) that
the proposed Transaction is fair from a financial point of view to the
AstraZeneca Shareholders and Novartis Shareholders, respectively.
The following meetings for analysts, investors and the press are being held
today.
8 a.m. UK time, Teleconference for financial analysts with
9 a.m. Central European Jon Symonds, CFO of AstraZeneca, and
Time Dr. Raymund Breu, CFO of Novartis.
Dial-in number: Europe +(41) 91 610 4111,
USA: + (1) 800 860 2442
Playback available: Europe: +(41) 91 610 2500
(Code 185), USA: +(1) 412 858 1440 (Code 185).
Playback starts at 10.30 a.m. Central European
time (9.30 a.m. UK time)
10.30 a.m. Swiss time Press conference at Cross Air
Center, Basel, Switzerland
(with live video broadcast to The
World Trade Centre, Stockholm,
Sweden)
1.30 p.m. UK time Analysts and investors conference at
Drapers' Hall, Throgmorton Avenue, London EC2
(with live video broadcast to The
World Trade Centre, Stockholm,
Sweden)
2.45 p.m. UK time Press conference at Drapers' Hall,
Throgmorton Avenue, London EC2
(with live video broadcast for
journalists to The World Trade
Centre, Stockholm, Sweden)
In addition, the following meeting for analysts and investors is being held
tomorrow, Friday, 3 December, in New York.
12.00 p.m. EST Analysts and investors conference at
Equitable Center, New York
Enquiries:
AstraZeneca
Steve Brown (UK) Tel: + (44) 171 304 5033
Mikael Widell (Sweden) Tel: + (46) 703 119 960
Rachel Bloom (US) Tel: + (1) 302 886 7858
CSFB
Richard Page Tel: + (44) 171 888 8888
Goldman Sachs
Guy Slimmon Tel: + (44) 171 774 1000
CSFB de Zoete & Bevan
(Broker to AstraZeneca)
Charlie Foreman Tel: + (44) 171 888 8888
Novartis
Press Office Tel: + (41) 61 324 2200
Switzerland
Marguerite Mamane Tel: + (41) 61 324 27 61
Thomas Staffelbach Tel: + (41) 61 324 27 53
International
Mark Hill Tel: + (41) 61 324 75 04
Ruder Finn
Kathy Bloomgarden Tel: + (44) 468 255 964
Morgan Stanley Dean Witter
Hans Meier-Scherling Tel: + (44) 171 425 5000
Credit Suisse First Boston (Europe) Limited ('Credit Suisse First Boston')
and Goldman Sachs International ('Goldman Sachs'), which are regulated in
the United Kingdom by The Securities and Futures Authority Limited, are
acting for AstraZeneca and no one else in connection with the Transaction and
will not be responsible to anyone other than AstraZeneca for providing the
protections afforded to customers of Credit Suisse First Boston or Goldman
Sachs respectively, or for providing advice in relation to the Transaction.
Morgan Stanley & Co. Limited ('Morgan Stanley Dean Witter'), which is
regulated by The Securities and Futures Authority Limited, is acting for
Novartis and no one else in connection with the Transaction and will not be
responsible to anyone other than Novartis for providing the protections
afforded to customers of Morgan Stanley Dean Witter, or for providing advice
in relation to the Transaction.
No offer or invitation to acquire securities in Syngenta is being made now
nor are offers being solicited. Any such offer or invitation will only be
made in documents to be published in due course and any such acquisition
should be made solely on the basis of information contained in such documents.
This press release is also not an offer of Syngenta shares (or ADRs). No
such shares or ADRs will be offered or sold in the United States unless they
are registered or exempt from registration under the United States Securities
Act of 1933. Any public offering of securities to be made in the United
States would be so registered or exempt and would be made by means of
documentation containing detailed information about Syngenta and management,
as well as financial statements.
A copy of this press release will be furnished, as a Form 6-K, to the U.S.
Securities and Exchange Commission (the 'SEC') by AstraZeneca, which is
subject to the informational requirements of the U.S. Securities Exchange
Act of 1934, as amended, that are applicable to foreign private issuers.
This Form 6-K and other information furnished to the SEC by AstraZeneca may
be inspected and copied by the public at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W. Room 1024,
Washington DC 20549, as well as at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, NY 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661.
In order to utilise the 'Safe Harbor' provisions of the United States Private
Securities Litigation Reform Act of 1995, AstraZeneca and Novartis are
providing the following cautionary statement.
This document contains certain forward-looking statements with respect to the
financial condition, results of operations and the businesses of AstraZeneca
and Novartis and Syngenta management's plans and objectives for Syngenta.
These statements and forecasts involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by these
forward-looking statements and forecasts, such as the ability of Syngenta to
integrate AstraZeneca's and Novartis' large and complex agrochemicals
businesses and realise synergies, difficulties of obtaining governmental
approvals for new products, exposure to fluctuations in exchange rates for
foreign currencies, the risk that R&D will not yield new products that
achieve commercial success, the risk of substantial product liability claims,
exposure to environmental liability, the impact of competition, price
controls and price reductions and inflation and the risk of loss or
expiration of patents and trademarks.
Appendix 1: Additional Information
Master Agreement
The following is a summary of the key terms of the Master Agreement which
AstraZeneca and Novartis have entered into in order to facilitate the
implementation of the Transaction.
AstraZeneca and Novartis have undertaken to contribute to Syngenta, the
assets constituting the agrochemicals business, in the case of AstraZeneca,
and the agribusiness, in the case of Novartis. AstraZeneca's 50% holding,
through its subsidiary AstraZeneca Holdings B.V., in Advanta and Novartis'
Animal Health business are not included in the Transaction. The Master
Agreement also provides for a division between the parties and Syngenta for
the liabilities relating to the parties' retained and contributed businesses.
The parties have agreed an exchange ratio in relation to Syngenta such that
Novartis Shareholders will receive 61%, and AstraZeneca Shareholders will
receive 39% of the shares of Syngenta. This exchange ratio cannot be
adjusted.
The parties have also agreed that, at completion, Syngenta should have a
solid investment grade rating.
AstraZeneca and Novartis have given certain warranties to each other. A
breach of warranties, subject to a threshold, will result in an adjustment
to the amount of net debt which can be contributed by the relevant party to
Syngenta.
The parties have agreed to enter into indemnity arrangements with Syngenta
in relation to the division of pharmaceuticals and agrochemicals liabilities.
Agreements will also be entered into in relation to certain sharing and
transitional arrangements between Syngenta and AstraZeneca and Novartis.
The parties have agreed to conduct their respective agrochemicals businesses
between signing and completion in accordance with certain agreed principles.
The Master Agreement is subject to the following conditions:
* AstraZeneca and Novartis shareholder approval;
* Clearance of the European Commission;
* The expiry or termination of any waiting periods under the
Hart-Scott-Rodino Anti-Trust Improvements Act 1976 (as amended);
* All other necessary governmental or regulatory authorisations, consents and
approvals which the parties consider to be necessary or appropriate to the
Transaction having been obtained;
* Each of the Swiss, London, New York and Stockholm Stock Exchanges having
agreed to list the shares of Syngenta;
* There having been no material adverse change; meaning a substantial
reduction in the sales of a business based on the pro forma accounts
compared to the previous financial year (and after excluding any material
change to the extent it has a similar effect on companies in the
agrochemicals industry as a whole);
* Consent under section 765 of the UK Income and Corporation Taxes Act 1988
of the United Kingdom Treasury to the transfer of the Syngenta shares by
AstraZeneca to its shareholders;
* Substantial completion of the AstraZeneca and Novartis reorganisations;
* Execution of a sharing agreement, a transitional agreement, business
contribution agreements and detailed indemnity agreements;
* No termination right having been exercised; and
* Registration in the commercial register of the share increases of Syngenta.
All conditions, other than the conditions for shareholder approval, may be
waived by the mutual agreement of AstraZeneca and Novartis.
The Master Agreement may be terminated:
* If AstraZeneca and Novartis agree in writing;
* By either AstraZeneca or Novartis, if any of the conditions shall be or
becomes incapable of being satisfied and is not waived by both AstraZeneca
and Novartis;
* By either AstraZeneca or Novartis, if the conditions are not satisfied or
waived by 31 December 2000;
* By either AstraZeneca or Novartis, if there is a material breach of a
representation or a warranty.
The parties have agreed that if either of the AstraZeneca Shareholders or
the Novartis Shareholders do not approve the resolutions to implement the
Transaction, the relevant party will pay USD 50 million to the other. If
the agreement is terminated for material breach of warranty, the party in
breach shall pay the other party USD 100 million.
The Master Agreement is governed by Swiss law; disputes which cannot be
settled in a mediation procedure will be referred to arbitration in Paris.
Transaction Mechanics
The implementation of the Transaction will require AstraZeneca
and Novartis to demerge their respective agrochemicals
businesses to shareholders at the same time as these businesses are
contributed to Syngenta.
In relation to AstraZeneca, an internal reorganisation will divide the
agrochemicals from its retained business so that ZENECA Agrochemicals
business can be transferred to Syngenta. AstraZeneca's 50% holding in
Advanta, through its subsidiary AstraZeneca Holdings B.V., is not included
in the Transaction. AstraZeneca will declare a dividend to its shareholders
which will be satisfied by the transfer of shares in Syngenta. Therefore,
AstraZeneca Shareholders will, on completion of the Transaction,
hold shares in Syngenta as well as in AstraZeneca.
Novartis will similarly undertake an internal reorganisation so that its
non-US agrochemicals business is held by Novartis Agribusiness AG and its US
agrochemicals business is held by Novartis US Co. Novartis' Animal
Health business will not be included in the Transaction. Novartis will then
demerge Novartis Agribusiness AG to its shareholders by way of a rights
offering and Novartis US Co will be demerged by a distribution of its shares
to Novartis Shareholders (or a trustee acting for all Novartis Shareholders).
Novartis Agribusiness AG will merge into Syngenta under a Swiss statutory
merger process and Novartis US Co in a US triangular merger.
Appendix 2: Syngenta Combined Sales Profile
The AstraZeneca figures below have been prepared in accordance with UK GAAP
and the Novartis figures in accordance with IAS. The combined figures are
indicative only, as differences in accounting principles and policies have
not been harmonised and no pro forma adjustments have been made to reflect
the Transaction. AstraZeneca's figures are published in US Dollars.
Novartis' figures, which are published in Swiss francs, have been converted
for the purposes of the combined figures at the average exchange rates ruling
for 1998 of USD:CHF 1.45.
Combined Business Segmentation:
Sales for Financial Year Ended 31 December 1998
ZENECA Novartis'
Agrochemicals Agribusiness Combined
(USD mm) (USD mm) (USD mm)
Herbicides 1,544 1,971 3,515
Fungicides 651 1,053 1,704
Insecticides 504 650 1,154
Seed Treatments, Other 91 478 569
Seeds -* 1,005 1,005
Total 2,790 5,157 7,947
* AstraZeneca's 50% holding in Advanta is not included in the Transaction.
Combined Geographic Segmentation:
Sales for Financial Year Ended 31 December 1998
ZENECA Novartis'
Agrochemicals Agribusiness Combined
(USD mm) (USD mm) (USD mm)
NAFTA (incl. Mexico) 1,008 1,892 2,900
Europe 899 1,964 2,863
Latin America 475 582 1,057
Asia/Pacific 310 489 799
Rest of World 98 230 328
Total 2,790 5,157 7,947
Appendix 3: Syngenta Combined Financial Information
The AstraZeneca figures below have been prepared in accordance with UK GAAP
and the Novartis figures in accordance with IAS. The combined figures are
indicative only, as differences in accounting principles and policies have
not been harmonised and no pro forma adjustments have been made to reflect
the Transaction. Because of its nature, it cannot give a true picture of,
and is not necessarily indicative of, the earnings before interest, tax,
depreciation and amortization (EBITDA) which would have been reported if the
Transaction had occurred at the beginning of the periods presented.
AstraZeneca's figures are published in US Dollars. Novartis' figures,
which are published in Swiss francs, have been converted for the purposes of
the combined figures at the average exchange rates ruling for 1998 and the
first six months of 1999 of USD:CHF 1.45 and USD:CHF 1.47, respectively.
Summary Income Statement:
Financial Year Ended 31 December 1998
ZENECA Novartis'
Agrochemicals Agribusiness Combined
(USD mm) (USD mm) (USD mm)
Sales 2,790 5,157 7,947
R&D (286) (461) (747)
EBITDA 486 1,131 1,617
Summary Income Statement:
Six Months Ended 30 June 1999
ZENECA Novartis'
Agrochemicals Agribusiness Combined
(USD mm) (USD mm) (USD mm)
Sales 1,612 2,935 4,547
R&D (140) (216) (356)
EBITDA 353 637* 990
* EBITDA is not adjusted for exceptional restructuring costs for Project
Focus (Novartis' previously announced restructuring plan) of USD 61
million (CHF 90 million) and for USD 84 million (CHF 124 million) charged
for receivable exposures in Brasil, Russia and the Ukraine.
Appendix 4: Taxation
The following is a brief summary of the main tax consequences which are
anticipated to arise for certain AstraZeneca Shareholders, who hold their
shares otherwise than as dealers, as a result of the proposed Transaction.
Shareholders who are in any doubt as to their tax position should seek
advice from their own advisers.
UK Shareholders
An application will be made to the Board of Inland Revenue for a statutory
demerger clearance in respect of the dividend in specie to AstraZeneca
Shareholders. If such a clearance is granted, no liability to tax will arise
for UK resident shareholders.
If statutory demerger clearance is not granted, the dividend in specie will
be an income distribution for UK resident shareholders. No liability to tax
would arise for individual shareholders liable to tax at the basic rate, for
corporate shareholders and for exempt institutions, such as pension funds.
However, UK resident individuals liable to the higher rate of tax would be
liable to tax on the distribution.
Further detail will be given at a later date.
US Shareholders
The receipt of Syngenta shares should not of itself trigger any shareholder
tax liabilities.
Swedish Shareholders
The receipt of shares in Syngenta will under current Swedish law be regarded
as a receipt of a taxable dividend.
Details of how different shareholder groups will be affected
will be given at a later date. It should, however, be noted that tax
deferrals obtained by Swedish shareholders in connection with the
AstraZeneca Merger Offer will not be affected by virtue of the dividend.
If this dividend was paid by a Swedish corporation ( aktiebolag ) it would be
exempt from tax. Swedish shareholders are liable to tax on the dividend
because AstraZeneca is not a Swedish registered company. However, it is
understood the Swedish Government is actively reviewing all parts of its tax
legislation which are potentially discriminatory by differentiating between
Swedish and other EU taxpayers, to test its conformity with EU law. The
particular section of the tax law under which this dividend is liable to
tax is included in this review.
Appendix 5: Financial Information on AstraZeneca, Excluding
ZENECA Agrochemicals
The following tables show, for illustrative purposes only and on the bases
and assumptions set out below, the summary income statements of AstraZeneca
for the financial year ended 31 December 1998 and the first six months of
1999. The summary income statements are presented for continuing operations
(excludes the results of the Specialties unit disposed on 30 June 1999) and
before exceptional items. Information for 1998 is also presented on a pro
forma basis, which includes adjustments related to the merger of Astra and
Zeneca, to illustrate the effect on sales and profits as if the Astra Merck
Restructuring and the Merger related payments to Merck & Co., Inc. had
occurred at the beginning of 1998 rather than July 1998 and April 1999,
respectively.
Pro Forma Earnings Before Interest and Tax For Financial Year Ended 31
December 1998
AstraZeneca
ZENECA excluding ZENECA
AstraZeneca Agrochemicals Agrochemicals
USD mm USD mm USD mm
Sales 15,815 2,790 13,025
Cost of sales (4,805) (1,511) (3,294)
Distribution costs (316) (107) (209)
Research and development (2,467) (286) (2,181)
Selling, general and
administrative expenses (5,046) (588) (4,458)
Other operating income 180 61 119
Operating Profit pre
exceptional items 3,361 359 3,002
Share of operating profit of
joint ventures and associates - 1 (1)
Earnings before Interest and
Tax, pre Exceptional Items 3,361 360 3,001
Earnings Before Interest and Tax For Six Months Ended 30 June 1999
AstraZeneca
ZENECA excluding ZENECA
AstraZeneca Agrochemicals Agrochemicals
USD mm USD mm USD mm
Sales 9,043 1,612 7,431
Cost of sales (2,768) (871) (1,897)
Distribution costs (167) (51) (116)
Research and development (1,312) (140) (1,172)
Selling, general and
administrative expenses (2,778) (286) (2,492)
Other operating income 85 19 66
Operating Profit pre
exceptional items 2,103 283 1,820
Share of operating profit of
joint ventures and associates 22 1 21
Earnings before Interest and Tax,
pre Exceptional Items 2,125 284 1,841
The above financial information for 1998 has been derived from the unaudited
historical financial information published after the completion of the merger
between Astra and Zeneca. For the six months ended 30 June 1999, the
information has been derived from the unaudited interim financial statements.
The financial information for both periods has been prepared in accordance
with UK GAAP.
Appendix 6: Definitions
The following definitions apply throughout this document, unless the context
requires otherwise:
AstraZeneca AstraZeneca PLC
AstraZeneca Board the Board of Directors of
AstraZeneca
AstraZeneca Shareholders holders of AstraZeneca shares
AstraZeneca Shares ordinary shares of U.S. $0.25 each
in AstraZeneca
Board the AstraZeneca Board, the Novartis Board or
the Syngenta Board as the case may be
CSFB Credit Suisse First Boston (Europe) Limited
CSFB de Zoete & Bevan Credit Suisse First Boston de Zoete & Bevan
Limited
GAAP generally accepted accounting principles
Goldman Sachs Goldman Sachs International
IAS International Accounting Standards
Master Agreement the agreement entered into today between
AstraZeneca and Novartis in order to implement
the Transaction
Morgan Stanley Dean Witter Morgan Stanley & Co. Limited
Novartis Novartis AG
Novartis Board the Board of Directors of Novartis
Novartis Shareholders holders of Novartis shares
Novartis Shares registered shares of CHF 20 each in Novartis
SEC the U.S. Securities and Exchange Commission
Syngenta Syngenta AG, the new company following the
Transaction
Transaction The proposed demerger and merger of the
agrochemicals business of AstraZeneca and the
agribusiness of Novartis to create Syngenta
United States or U.S. United States of America, its territories and
possessions, any state of the United States of
America and the District of Columbia
U.S. Securities Act U.S. Securities Act of 1933 and the rules and
regulations promulgated thereunder