The Bayer supervisory board approved the divestment today. "This decision is fully in line with our strategy for systematically aligning our health care business. We are concentrating on pharmaceuticals for both humans and animals, and products that can be promoted directly to patients," explained Bayer AG management board chairman Werner Wenning.

The consumer products Bayer HealthCare Diabetes Care will not be affected by the transaction, nor is the contrast agents (diagnostic imaging) business of Schering AG, which will form an important part of the future Bayer Schering Pharma AG.

Wenning said that the systems business of the Diagnostics Division with its emphasis on hardware, IT networking and comprehensive equipment service, was subject to different success factors than the other Bayer HealthCare divisions and the company was therefore divesting these activities as part of the consolidation phase in the diagnostics market.

"We are convinced that the successful laboratory equipment business has even better long-term development prospects in a company specialising in medical technology," he added.

The closing of the transaction is expected for the first half of 2007, subject to the approval of the antitrust authorities.

According to Dr Klaus Kleinfeld, the president and CEO, Siemens, "Demographic change is greatly increasing global demand for healthcare services and thereby generating excellent growth opportunities for Siemens. The acquisition of Bayer Diagnostics is part of our targeted strategy to create the healthcare industry''s first integrated diagnostics company by combining the entire imaging diagnostics, laboratory diagnostics and clinical IT value chain under one roof."

Kleinfeld also noted that this acquisition, which is subject to regulatory approval is, like other purchases in the last few quarters, further proof that Siemens is rigorously focusing its portfolio on promising growth fields.

In April 2006, Siemens had announced its planned acquisition of Diagnostic Products Corporation (DPC) in the US, a leading immunodiagnostics company.

Dr Erich R Reinhardt, member of the Siemens managing board and president of Siemens Medical Solutions Group, commented, "Molecular medicine is becoming increasingly important since it enables healthcare professionals to identify the causes of disease using genetic profiles. With the help of molecular medicine, it will be possible not only to predict the effects of the medications selected and tailor treatment for individual patients, but also to diagnose disease at an early stage."

He added, "The planned acquisition of DPC has provided us with access to laboratory diagnostics. With the acquisition of Bayer Diagnostics, we will now have a comprehensive portfolio in this key future-oriented market. These deals will enable us to considerably expand our range of expertise and further our leading position as a trendsetter in healthcare."

The two acquisitions will make Siemens Medical Solutions No 2 worldwide in immunodiagnostics. In addition, the acquisition of the Bayer unit will enable the Siemens Group to tap the rapidly growing market for molecular diagnostics based on gene analysis (nucleid acid testing). Bayer Diagnostics is also a global market-leader in clinical chemistry with a leading position in near-patient testing, laboratory automation and haematology (blood cell diagnostics).

Siemens Medical Solutions develops products and services that improve recovery rates by diagnosing diseases earlier and more accurately and is an innovations driver in diagnostic imaging systems (in-vivo diagnostics) and the market leader in healthcare IT.

Last year it further strengthened its position in molecular in-vivo diagnostics through the acquisition of CTI, delivering increased capabilities in the development and manufacture of positron emission tomography (PET) systems that can be used, for example, in the diagnosis of cancer and Alzheimer''s disease, in addition to advanced development of new molecular contrast agents and pharmaceutical tracers.

"Siemens is the ideal company to continue developing Bayer HealthCare Diagnostics as a core business," said Arthur Higgins, chairman of the board of management of Bayer HealthCare AG. Explaining the decision to exit the diagnostics business, Higgins said,"Bayer Healthcare Diagnostics has grown considerably faster than the market in terms of earnings and profitability over the past three years.

For Bayer the after-tax proceeds of the divestment will be about €3.6 billion. The company says this transaction has been pursued irrespective of the Schering acquisition and its financing. As a result of the sale, the planned €1.3-billion hybrid bond may be postponed or the size of the bond issue may be reduced.

Bayer, which had announced fresh equity raising of up to €4 billion in connection with the Schering acquisition is now likely to be reduced by €500 million. In March this year Bayer had already issued a mandatory convertible bond for €2.3 billion as a first step. "The effect of this divestment is to substantially reduce our debt, thus helping to improve our credit profile," said Wenning.