Swiss pharmaceutical giant Roche Holding will buy holding company Corange for $11 billion in a deal that will make it a world leader in the medical diagnostics business.
Roche announced Monday it will take over Corange's holdings in Germany's Boehringer Mannheim, a market leader in cardiovascular and cancer treatments. It will also gain an 84.2% stake in DePuy, a Warsaw, Ind.-based producer of orthopedic products that had an initial public offering in October.
The acquisition comes amid consolidation in the pharmaceuticals industry, where companies are combining to counter soaring drug development costs. Investors have expected Roche to make a move since its fellow Swiss firms Ciba-Geigy and Sandoz combined to form Novartis, now the world's largest drug company, in a $36-billion stock swap last year.
"Everyone has been waiting for Roche to act," said Patrick Carisch, a fund manager at Credit Suisse. "It's an unexpected target, but it's a good choice as Roche becomes a world leader in the field, and that's what it's all about."
Roche didn't give a breakdown of the purchase price. At Friday's closing price, an 84% stake in DePuy was valued at about $1.95 billion. That suggests Roche is paying about $9 billion for Boehringer Mannheim.
Layoffs were expected, but Roche gave no specifics. The takeover requires approval by regulatory authorities in several countries.
Roche, the maker of Valium and the AIDS-fighting drug Invirase, had a profit of $2.8 billion and sales of $11.4 billion last year. It has about 50,000 employees.
Boehringer Mannheim, employing 18,000 people, had annual sales of about $3 billion last year. Boehringer Mannheim has long been a leader in diagnostic tests. In 1956 it introduced Glucotest, the first urinary test strip for diabetics to use at home.
Bloomberg News reported that Corange's decision to sell $11 billion worth of corporate assets was fomented by years of family friction.
Corange, a closely held, Bermuda-based company, is owned by four branches of the Engelhorn family. Curt Engelhorn, chairman of the board, owns the largest stake with about 40%.
Engelhorn, 71, has homes in Bermuda, London and Switzerland. He was not available for comment.