Rhone-Poulenc joins with Hoechst: Move is first step toward a full merger between two giants

PARIS - Two of Europe's largest drug makers, Hoechst of Germanyand Rhone-Poulenc of France, are merging their pharmaceutical andagrochemical operations.

Today's deal is a step toward a full merger between the FrenchandGerman companies, which should be completed within three years, saidRhone-Poulenc Chairman Jean-Rene Fourtou.

The widely anticipated combination of the pharmaceutical andagrochemical businesses would create a company with annual sales ofabout $20 billion, tying Switzerland's Novartis for leadership inthelife sciences industry.The new company will be called Aventis and will be based inStrasbourg in eastern France. Hoechst and Rhone-Poulenc will eachown 50 percent.The local impact of the merger was not immediately known."We want to create a new company, with European roots and globalreach, to take full advantage of the extensive opportunities of lifesciences in the 21st century," Rhone's Fourtou and Jurgen Dormann ofHoechst said in a statement.It was anticipated that Dormann would be the new chairman ofAventis, and Fourtou the vice chairman, the statement said.The two companies expect the deal will help them save $1.2 billionin three years, with 60 percent of those savings in theirpharmaceutical operations and 40 percent in agrochemicals.Unions in France and Germany have been critical of the merger,fearing layoffs. Hoechst employs 118,000 workers and Rhone-Poulenc,68,000.Analysts have warned against a full merger until the heavilyindebted firms reduce costs.Rhone-Poulenc shares were 4.2 percent lower in afternoon trading.