Summary
On April 22nd Solvay appended a note to its initial April 1st press release which we commented upon at the time (Solvay confirms it is proceeding with an analysis of various options for its pharmaceutical activities) on its web site: http://www.solvay.com/services/newsfrompo/0,,73459-2-0,00.htm This confirms that Solvay is proceeding with an analysis of various options for its pharmaceutical activities - not just M&A - which rumors have concentrated upon.
Analysis
The note discusses the various options open to Solvay, including maintaining the status quo. It stresses that M&A should not be assumed to be the outcome.
In our view, Solvay's outline of the alternatives is perfectly reasonable as far as it goes. What does emerge is that the company sees none of the alternatives open to it as being particularly easy ones. Divesting pharmaceuticals would no doubt be possible - there should be sufficient interest - but as we have said previously, where would that leave the remaining, chemical/plastics interests of the company ?
"Considerable effort and important resources" emerge separately in its note as being an issue for Solvay in continuing with both its pharmaceutical and its chemicals/plastics activities. This makes it in our view more likely that the company will opt out of one or the other of them - and then use the proceeds to strengthen its position in the remaining activity.
An alternative would be to amalgamate with a company in a similar position, most obviously, as we have previously mentioned, UCB. But track records of such mergers are poor, and it would not obviously overcome the issues identified by Solvay.
Finally, Solvay must be careful that its specialist advisors do not have a vested interest in M&A - the option that is usually the most lucrative.
