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Upjohn To Sell Polymer Chemical Unit

May 03, 1985

By Michael L. Millenson

Upjohn Co. said Thursday it will sell its polymer and chemical operations to Dow Chemical Co. for an undisclosed price and concentrate on its health care and agricultural products businesses. In response, Upjohn stock, already up sharply in recent weeks, rose another $2.75 a share to $86.37 in active trading at mid-day on the New York Stock Exchange. The company, based in Kalamazoo, Mich., has drawn investor attention as it completes final testing of topical minoxidil, a preparation that has shown some effectiveness in treating and preventing male pattern baldness.

Polymer chemical operations accounted for $287.4 million, or 13 percent, of Upjohn`s 1984 revenues of $2.2 billion. Upjohn will retain its fine chemical and pharmaceutical chemical operations, which accounted for $37.6 million in 1984 sales. Losses from the polymer chemical operations last year offset profits in fine and pharmaceutical chemicals for a total division loss of $9 million, an Upjohn spokesman said.

R.T. Parfet Jr., chairman and chief executive officer of Upjohn, said the divestiture, which is subject to regulatory approval, would not have a material effect on earnings. He added: “It will provide a favorable contribution to cash flow. The resources that will be available as a result of this sale will be of significant benefit to the company when employed in our other businesses.”

Michael Harshbarger, an analyst at Hayes & Griffith Inc., a Chicago investment banking firm, called the move “a long-term positive“ for the company. Although the chemicals unit was expected to post an operating profit of about $5 million this year, it`s disposal will enable Upjohn to concentrate on health care, Harshbarger said. Upjohn acquired the polymer chemicals business in 1963. It represented both a diversification attempt and a fit in its manufacturing processes with Upjohn`s then-dominant pharmaceuticals, steroids. However, in a recent interview, Parfet acknowledged that the business no longer seemed to fit Upjohn`s long-range needs, especially because of the capital investment needed to remain competitive.

The Upjohn business includes facilities and shares of joint ventures in the United States, Japan, Portugal and the Netherlands.