Hoechst, Rhone Confirm Talks

Two of Europe's biggest pharmaceutical companies - German pharmaceutical and chemical company Hoechst AG and France's Rhone-Poulenc - admitted after more than a week of heated speculation that they are in merger talks to create the world's biggest pharmaceutical firm.

In a short, tersely worded statement, the companies said: "Hoechst AG and Rhone-Poulenc S.A. confirmed today (Wednesday) that they are in discussions with a view to combining their life sciences businesses. No guarantee can be made as to the outcome of the current discussions."

Last week, on Nov. 17, Hoechst incited expectations that a merger announcement was coming any day when it announced that it was splitting into two separately listed companies - effectively spinning off its chemicals business and leaving its non-life science businesses.

Before the spin-off, which has yet to be accomplished, Hoechst and Rhone Polenc would have a combined market capitalization of some $43 billion. It was not immediately clear what the market cap of the merged companies would be without Hoechst's chemicals business.

Industry sources said it's likely that Hoechst and Rhone-Poulenc will make an announcement early next week, the Associated Press reported.

The merged firm would be worth some $50 billion and sales in its pharmaceutical sector would outstrip market leader Glaxo Wellcome's.

Analysts said the merger would improve the companies' market share, while enabling the combined firm to save hundreds of millions of marks a year in the pharmaceutical sector by fusing areas where they overlap, including cancer and allergy treatments.

The two companies together employ 180,000 people. The pharmaceutical company would be based in Frankfurt and headed by Richard Markham, currently chief executive of Hoechst's pharmaceutical division Hoechst Marion Roussel. The joint company's agrochemical activities would be based in Lyon, France, and headed by Alain Godard, the current chairman of Rhone-Poulenc's plant and animal health division.

Sources familiar with the talks also said that Hoechst would have to get the go-ahead from German pharmaceutical maker Schering, with which it shares a pesticide joint venture.