The acquisition of Aventis CropScience, the number three in agrochemicals, is a key step in Bayer's ambitious plans to expand its highly-profitable agrochemical activities. The move will catapult it from number six to the top of the sector.

The newly-merged unit will have sales of about E6.5bn-E7bn ($5.9bn-$6.4bn), on a par with Syngenta, the leader, although it is expected to face disposals to gain regulatory clearance.

Regulators are likely to look closely at the implications of Bayer's position in insecticides and sugar beet herbicides.

BASF, Bayer's German competitor, has said it would be interested in acquiring the insecticides.

The acquisition of Aventis CropScience significantly strengthens Bayer's position in herbicides and plant biotechnology, where it lags its competitors.

However, analysts said the less-profitable concern would dilute Bayer's 2001 earnings, after goodwill, by 13 per cent, and 7 per cent in 2002.

They were also sceptical of Bayer's projected cost savings, particularly as its German rival BASF has failed to deliver the expected synergies from its recent acquisition of Cyanamid.

The increase in debt to pay for the deal will leave Bayer with little possibility to invest in its embattled pharmaceuticals unit.

The division is facing the prospect of negative growth for the next three years after fatal side effects forced the withdrawal of its most important new drug, Lipobay. Nevertheless the acquisition is a triumph for Bayer, which is resisting shareholder pressure to break up its conglomerate structure.

It has been thwarted several times in its attempts to build up both sides of its life science business through acquisitions.

It was outbid for DuPont Pharma, which was sold to BMS for $7.8bn in June, and Cyanamid, the agrochemicals unit of American Home Products that was bought by BASF for $3.8bn last year.

Aventis CropScience has a broad and balanced portfolio, making it able to ride-out regional volatility, as well as a strong pipeline of promising products. However, sales have been falling since it was created in the 1999 merger of Rhone-Poulenc of France and Hoechst of Germany.

Aventis also faces problems with Balance, its corn herbicide and the damaging Starlink affair, where genetically modified corn not licensed for human use was found in a range of food products. However, Bayer will not pick up the Starlink liabilities, which will remain with Aventis.

The disposal of the crop science division leaves Aventis free to concentrate on pharmaceuticals.

Its drugs business has one of the fastest rates of earnings growth in the sector, boosted by cost savings from the Hoechst-Rhone-Poulenc merger and increasing margins as it puts more marketing muscle behind leading products. Aventis also intends to pay down debt from E11.5bn to E5bn.

Schering, which will earn E1.3bn from the disposal of its 24 per cent stake in the concern, is expected to use the funds to expand its presence in the US and to acquire products to deepen its drug development pipeline.

The company, best know for the contraceptive pill, is keen to expand its emerging cancer business.

Analysts say the Bayer-Aventis deal puts a question mark over the long-term future in agrochemicals of Dow and DuPont, the US chemical companies.

After growing faster than their European competitors in the late 1990s, Dow and DuPont were hit hard by the downturn in farming in 1999. Dow recently bulked up its fungicides activities with the $1bn acquisition of Rohm and Haas.

Both companies are expected to look hard at Monsanto, which has sales of $5.5bn. Pharmacia, which owns 84 per cent of Monsanto is expected to sell the stake next year.

The $33bn crop protection market has become increasingly consolidated as companies struggle to square high R&D costs with pressure on sales.

In the past two years BASF has bought Cyanamid, from AHP while AstraZeneca of the UK and Novartis of Switzerland combined their agrochemicals operations to create Syngenta.

With global crop prices at historic lows, land being taken out of use in Europe and continuing turmoil in Asia and farm incomes are severely depressed. The agrochemicals market is growing at about 2 per cent. There has been a sharp drop in the price of herbicides and fungicides, but insecticides have held up better.

Aventis' exit from agrochemicals leaves only Bayer, which has one of the most profitable operations in the sector, committed to the life science model - the theory that there are synergies between human healthcare and crop protection. Most companies have concluded that harsh conditions in farming mean unaccepted dilution of their pharmaceutical growth.