Lonza to acquire Arch Chemicals

Lonza Group, a supplier to the pharmaceutical, healthcare and life science industries, and Arch Chemicals, a global biocides company providing solutions to destroy or to selectively inhibit the growth of harmful microorganisms, announced today that they have signed an agreement pursuant to which Lonza has agreed to commence a tender offer for 100 percent of Arch Chemicals' outstanding shares of common stock at a price of USD 47.20 per share in cash.

Lonza's offer represents a 36.7 % premium to Arch Chemicals' average closing price over the last 30 trading days. Based on the offer price for all the outstanding shares, Arch Chemicals' enterprise value would be USD 1.4 billion (approximately CHF 1.25 billion).

Lonza's cash offer is subject to customary conditions including the tendering of more than two-thirds of Arch Chemicals' outstanding shares of common stock and clearance from antitrust regulatory authorities. Lonza expects to commence the tender offer by 15 July 2011 and to complete the tender offer later in 2011.

Upon completion of the transaction, Lonza will have the world's leading microbial control business with 2010 pro-forma sales in this life science market of approximately USD 1.6 billion, combining the complementary product solutions of both companies. Customers, as a result, will have in Lonza a complete solutions provider for their microbial control needs, and the new business will be ideally positioned to increase R&D and product development spending across its broader product portfolio. Lonza will offer this complementary range of products and actives to a broader range of customers in both established and emerging markets. The hygiene, water treatment, materials protection and personal care segments are expected to be the key growth sectors for the combined business. The combined business will also have a broad line-up of regulatory approved microbial control active ingredients, which will allow Lonza to bring to market new innovative microbial control formulations and thereby grow revenues across the portfolio.

Microbial Control — a global growth opportunity

The global microbial control market is currently valued at approximately USD 10 billion, and is growing at approximately 4-6% per annum. The key end-use segments of the market -- water treatment, hygiene, materials protection and personal care -- are growing at faster rates. The largest markets are North America, Europe and Japan. The fastest growing microbial control markets are Brazil, India, China and South Africa.

Arch Chemicals has 23 primary manufacturing and research facilities around the world. Arch Chemicals currently employs approximately 3,000 people and is headquartered in Norwalk, Connecticut (USA). In 2010, Arch Chemicals had sales of approximately USD 1.4 billion, of which approximately USD 1.2 billion were from microbial control products.

Arch Chemicals' and Lonza's microbial control business models are highly complementary. Each business produces chemical active ingredients that, when registered, are sold either as ingredients or as formulations for microbial control applications. The active ingredients and formulations produced by Arch Chemicals and Lonza are used to selectively destroy and control the growth of harmful microbes. The combined resources of both companies will provide customers with better product solutions and services.

Given the complementary geographical footprint of both companies, this acquisition will also strengthen Lonza's position in the high-growth economies of China, India, Brazil and South Africa. In these countries, increasing regulation is expected to lead to greater use of already approved active ingredients and formulations, a trend that is expected to result in further industry consolidation.

Value creating acquisition

The acquisition of Arch Chemicals is expected to be value creating for Lonza. Combining Arch Chemicals with Lonza's microbial control business will lead to substantial synergies in the administrative areas. Lonza is targeting at least USD 50 million in savings by year two following completion of the transaction.

In addition, Lonza expects to generate increased sales of USD 40 million by year three following completion of the transaction by leveraging the technical capabilities, applications expertise and extended reach of the two businesses. Additional growth synergy will be developed based on increased investments into R&D once the businesses have been integrated.

Lonza anticipates that the transaction will result in one-time integration costs of USD 85 million over the next two years.

Under the terms of the merger agreement, Lonza has agreed to commence a cash tender offer to acquire all of Arch Chemicals' outstanding shares of common stock at an offer price of USD 47.20 per share. The closing of the tender offer, which is expected to occur later in 2011, is subject to customary terms and conditions, including the tender of more than two-thirds of Arch Chemicals' outstanding shares of common stock, the expiration or termination of the Hart-Scott-Rodino Antitrust Improvements Act waiting period and the consent of European-based antitrust regulatory authorities. The definitive merger agreement provides for the parties to effect a merger following the completion of the tender offer, which will result in all shares not tendered in the tender offer being converted into the right to receive USD 47.20 per share in cash. In connection with the pending acquisition of Arch Chemicals by Lonza, the Arch Board of Directors has suspended the company's dividend, effective immediately.

JP Morgan and Morgan Stanley act as financial advisers for Lonza and Arch Chemicals, respectively. Jenner & Block LLP is providing legal counsel in connection with the transaction to Lonza, and Cravath Swaine & Moore LLP is providing legal counsel to Arch Chemicals.

About Lonza

Lonza is a supplier to the pharmaceutical, healthcare and life science industries. Products and services span its customers' needs from research to final product manufacture. It is the global leader in the production and support of active pharmaceutical ingredients both chemically as well as biotechnologically. Biopharmaceuticals are one of the key growth drivers of the pharmaceutical and biotechnology industries. Lonza has strong capabilities in large and small molecules, peptides, amino acids and niche bioproducts which play an important role in the development of novel medicines and healthcare products. In addition, Lonza is a leader in cell-based research, endotoxin detection and cell therapy manufacturing. Furthermore, the company is a provider of value chemical and biotech ingredients to the nutrition, hygiene, preservation, agro and personal care markets.

Lonza is headquartered in Basel, Switzerland and is listed on the SIX Swiss Exchange. In 2010, the company had sales of CHF 2.680 billion.

About Arch Chemicals

Headquartered in Norwalk, Connecticut (USA), Arch Chemicals, Inc. is a global Biocides company with annual sales of over USD 1 billion. Arch and its subsidiaries provide chemistry-based and related solutions to destroy or to selectively inhibit the growth of harmful microorganisms. The Company is concentrated in the areas of water treatment, personal care, health and hygiene, industrial preservation and protection, and wood treatment. Arch Chemicals operates in two segments: Biocides Products and Performance Products. Together with its subsidiaries, Arch has approximately 3,000 employees and manufacturing and customer-support facilities in North and South America, Europe, Asia, Australia and Africa. For more information, visit the Company's Web site at