Aventis Plans to Split Off Crop Unit In Deal That Could Fetch $6.86 Billion

French drug maker Aventis SA unveiled plans to shed its crop-protection division in a strategic overhaul that could fetch as much as eight billion euros ($6.86 billion), but Germany's Schering AG, which holds a 24% stake in the unit, may prove an obstacle to the divestment.

Aventis said it expects to shed the unit, to be renamed Agreva, by the end of next year. The company's supervisory board formally approved the proposal on Tuesday, and Aventis officials said options under consideration include an initial public offering and a sale to a single buyer.

Taking Agreva public, however, would require delicate negotiations with the German pharmaceuticals concern. Schering's chief financial officer, Klaus Pohle, said in an interview that the company isn't prepared to sell its stake without a drastic improvement in current stock-market valuations for agrochemical companies. One of several reasons those valuations are down is public wariness, especially in Europe and Japan, of genetically modified organisms in general and Aventis's StarLink corn in particular.

While some analysts dismiss Mr. Pohle's objections as a negotiating ploy, his hand is strong. Under a pact with Aventis, Schering enjoys minority-shareholder protections amounting to an effective veto over major strategic decisions involving the division. An Aventis spokesman said talks have begun with Schering regarding the divestment of Agreva.

Investors welcomed prospects of the French company's long-awaited exit from agrochemicals and sent Aventis shares up two euros to 88.25 euros in Paris. In Frankfurt, Schering stock closed down 1.25 euros at 66.10 euros.

Unloading the crop-protection operations would leave Aventis, of Strasbourg, a pure pharmaceuticals company. Citing BASF AG's $3.8 billion purchase of the Cyanamid agribusiness unit of American Home Products this year, Commerzbank chemicals analyst Michael Vara suggested that Agreva could be valued at as much as two times sales. Because of modest growth rates projected for agrochemicals over the next few years, that potential valuation isn't likely to increase a lot soon, he added.

Aventis Posts Strong Life-Science Results as Charges Lead to Group Profit Decline (Nov. 10)

Corn-Recall Cost Could Reach Into the Hundreds of Millions (Nov. 3)

Aventis Raises Full-Year Forecast After Net Income Jumps by 68% (Sept. 1)

The StarLink controversy won't help. Starlink is a type of corn bioengineered to kill insect pests that Aventis launched three years ago in the U.S. Because it was approved only for animal feed or industrial use, it needs to be strictly segregated from corn destined for human consumption. But small amounts of StarLink have become mixed with the U.S. food-corn supply, triggering in recent months recalls of taco shells by food producers and the withdrawal of StarLink from the U.S. market. A spate of lawsuits is expected as a result of the uproar. An Aventis spokesman said that hasn't derailed plans to shed Agreva.

Attorneys general from 16 states mailed a joint letter Tuesday to Aventis's office in North Carolina, saying the company should do more to protect farmers and grain-elevator operators from financial losses tied to StarLink corn. The Iowa attorney general and his counterparts want Aventis to "increase their effort" to find buyers for the commingled corn and StarLink corn and to do more to "accept responsibility for these economic losses."

Government officials have said Aventis failed to make sure that corn was grown with buffers and handled with certain restrictions against commingling that were conditions of StarLink's approval. Aventis officials say seed companies licensed to incorporate the corn into their own products were responsible for notifying farmers about the restrictions.

Aventis CropScience, the company's crop-protection unit, said in a statement that it takes the letter's concerns "very seriously" and that "we are making every effort to work with growers," elevator operators and grain handlers.

Meanwhile, Japanese companies, the biggest customer of American corn farmers, said they are delaying purchasing corn from the U.S. because of lingering concerns over genetic modifications. Japan buys about 16 million metric tons of corn a year, almost all of it from the U.S.