Degussa Forms Fine Chemicals Joint Venture in China

Degussa AG (Düsseldorf, Germany, www.degussa.com) and Lynchem Co., Ltd. (Dalian,Liaoning Province, China, www.lynchem.com) signed a contract to establish acustom manufacturing joint venture.

The joint venture is part of Degussa's strategy to leveragemanufacturing assets in Asia for its pharmaceutical fine chemicalsbusiness activities. Degussa is using horizontal integration to allowfor cost-competitive manufacturing of on-patent intermediates and stepsin the synthesis of active pharmaceutical ingredients (APIs),off-patent APIs, and other special chemicals in the Chinese jointventure. Degussa says it will focus its European custom manufacturingsites to produce high-value regulated intermediates and on-patent APIs.

Lychem has 800 m³ of reactor capacity at a 50-hectarefacility inDalian, Liaoning Province. It employees 1200 employees and had sales of35 million euros ($45 million) in 2005.

The new company, Degussa Lynchem Co. Ltd, is Degussa's second deal incustom manufacturing in Asia in 2006. Earlier this year, Degussa signeda long-term, nonexclusive agreement with the Indian custom manufacturerHikal Ltd. (Mumbai, India, www.hikal.com) under which Hikal will providemanufacturing of advanced intermediates and APIs for Degussa.

Degussa will hold 51% in Degussa Lychem Co. Ltd, and Lychem theremaining 49%. The deal is expected to close before the end of 2006.