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Aventis to Dump AgBiotech in Wake of StarLink Corn Scandal

In the wake of the StarLink scandal, Aventis, the biotech conglomerate
makes plans to spin off or dump its agbiotech division.

Aventis To Sell Agchems Nov. 15

LONDON (Reuters) - Franco-German Aventis SA said on Wednesday it
planned to sell its agrochemicals and seeds business to focus on
faster-growing pharmaceuticals in a move investors said could
increase its market rating. The business -- which is 24 percent-owned
by Germany's Schering AG -- has been tarnished by recent controversy
over its StarLink genetically modified maize, but could be worth some
six billion euros ($5.14 billion), analysts estimated.

Aventis is following the lead of Swiss and British rivals Novartis AG
and AstraZeneca Plc which recently merged and spun off their agchem
interests into a new company, Syngenta AG.

All three companies had backed the concept of ``life science'' --
marrying expertise in healthcare and agriculture. The divestments
reflect the demise of this grand idea.

``I welcome the move. We don't want to buy conglomerates anymore,''
said Eric Bernhardt, a fund manager with Clariden private bank in
Zurich who owns Aventis stock.

``Agriculture is a low growth area and has been dragging down the
rest of the company. The market growing only two to three percent a
year against the 11 percent or so revenue growth expected from
pharmaceuticals.''

Shares in Aventis, which have outperformed the European drugs sector
by 19 percent so far this year, gained 2.7 percent to 88.55 euros by
1200 GMT as investors welcomed the move which will provide strategic
focus and reduce debt.

IPO OR TRADE SALE?

Aventis -- which was formed last year from the merger of Rhone
Poulenc and Hoechst -- said it aimed to complete the divestment of
Aventis CropScience by the end of 2001.

It will evaluate all value-enhancing options, including a potential
public offering (IPO) under the name Agreva. A spokesman for
Schering, which must give its blessing to the sale, said he did not
favor an IPO in the short term. Aventis may find it tough to get a
good price for the business, with the sentiment toward the sector
soured by slack demand from a depressed farm sector and mounting
public concerns about genetically modified (GM) produce. The GM row
was reignited by the recent discovery of StarLink corn, approved for
animal feed, in consumer foods in the U.S., sparking worries about
possible allergic reactions and leaving Aventis vulnerable to
liability claims. Syngenta's debut has not been auspicious. The stock
floated on Monday but fell below an already low the issue price.

David Beadle, analyst at UBS Warburg, said he had recently cut his
valuation on Aventis CropScience to six times Enterprise
Value/EBITDA, from nine times previously, reflecting the poor
valuations achieved by Syngenta and U.S. firm Monsanto Co. That would
imply a price just under six billion euros.

Deutsche Bank analyst Susan Haylock said Aventis might get a higher
price via a trade sale to a leading U.S.or European agchem firm,
although antitrust issues could be a hurdle.

Syngenta -- the world leader in pesticides -- is viewed as too big
already to be able to win approval for such a deal and a spokesman
said its focus was on integrating existing operations.

Philippe Lanone, analyst at CDC Bourse in Paris, noted Aventis ``is
not letting itself be affected by the weak valuation of Syngenta,''
adding it would have been worse if Aventis had been deterred from
divestment by Syngenta's lacklustre debut.

SCHERING STAKE

Aventis spokesman Carsten Tilger said the company had been in touch
with Schering but he declined to speculate on whether or Schering
would opt to retain its holding in CropScience.

``We have informed them about our plans and now we are in talks
about how we will proceed in a joint way,'' he said.

UBS Warburg's Beadle said Schering might be reluctant to sell its
stake -- particularly if such a move left it vulnerable to a takeover
bid.

``Any predator will find Schering far more attractive with 1.5
billion euros of cash on its balance sheet than a stake in an agchem
business, so they may well hold on to their 24 percent stake,'' he
said.

Schering shares, which have outperformed the European sector by 28
percent this year, dipped 0.8 percent to 66.79 euros.

Aventis is in the process of selling its animal nutrition business
but is retaining its 50-percent stake in the animal health joint
venture Merial. It is also proceeding with the sale of Messer and
Wacker, its remaining industrial activities.

(Additional reporting by Noelle Mennella in Paris and Steven Silber
in Frankfurt)

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