Bayer chief Schneider squelchesrumors that Agfa will be divested

February 28, 1996

Off-the-cuff comments had sparked market gossipThe chief of German chemical giant Bayer AG threw a monkey wrenchinto the rumor mill this month, stating that Bayer does not planto divest Agfa, its Belgium-based film business. Bayer

Off-the-cuff comments had sparked market gossip

The chief of German chemical giant Bayer AG threw a monkey wrenchinto the rumor mill this month, stating that Bayer does not planto divest Agfa, its Belgium-based film business. Bayer chairmanManfred Schneider told Reuters that rather than sell off Agfa,Bayer would work to improve the company's profit performance.

Schneider's comments are a response to a controversy that was,to some degree, of his own making. It began when he told reportersat a news conference in Europe last year that Bayer might be interestedin selling Agfa (SCAN 7/19/95). Things heated up again in Novemberwhen an article in the Financial Times of London quoted Schneideras saying that Bayer was planning to spin off Agfa into a separatecompany (SCAN 12/27/95).

Agfa representatives have conducted damage control, statingthat Schneider's alleged remarks did not represent official Bayerpolicy. But until this month, Schneider had made no move to clarifyhis earlier statements. He was crystal-clear in speaking to Reuters,however.

"A disinvestment is not part of our plans," Schneidersaid. "Agfa is not a group which needs to be completely overhauled."

He did admit that Bayer has not been satisfied with Agfa'sfinancial performance, with net profit margins in the 3% range.Bayer hoped that Agfa could double its margins in the medium term,Schneider said.

Schneider's most recent comments come as a relief to Agfa'smedical imaging executives, who have experienced some market falloutas a result of customer uncertainty over Agfa's long-term future,according to Caren Mason, senior vice president of the technicalimaging systems division for Agfa's U.S. subsidiary in RidgefieldPark, NJ.

"I don't think that (the rumors) have been damaging inthat we have not had any change in customer decisions with regardto future plans with Agfa," Mason said. "However, becausethe industry is in such a state of flux, there has been more questioningregarding Agfa's position, especially with regard to PACS partnershipsin the future, because of the long-term implications of that."

Some group purchasing organizations have also been concernedabout the divestiture speculation. Those GPOs are interested inAgfa's plans to merge its hospital information systems technologywith information systems that Bayer is developing for pharmacyand laboratory diagnostics environments, Mason said. The mergerof such systems will go a long way toward creating an enterprise-wideinformation system, and GPOs would like to see Agfa and Bayerremain united and achieve those synergies.

Mason said that there have been communications between Agfaofficials and Schneider's office about the impact of the divestiturespeculation on Agfa's operations. That may have resulted in theReuters announcement.

"Something that's said that's not a part of a news conference,or something that's said that's part of cocktail chatter thatturns into such a great big situation is rather disconcerting,"Mason said. "You want to make sure that you don't place moreemphasis on it than is necessary. We're very pleased that theclarification has come."

While the overall Agfa business may suffer from anemic profitmargins, Agfa's medical operations have been above budget andthe division had a strong 1995, according to Mason. PACS revenueswere at least 10 times higher last year than in 1994 and moregrowth is expected this year.

Like other vendors, most recently Kodak, Agfa is examiningits x-ray film distribution system and may make changes in thenext several months. These changes may involve establishing anew distribution channel for Agfa's line of premium film, whichat present is sold almost exclusively on a direct basis, Masonsaid.

"We are looking at alternative channel strategies in thatenvironment," she said. "We will do some things differently."