Oct. 1 (Bloomberg) -- Cytec Industries Inc., a U.S. maker of materials for the aerospace and car industries, agreed to buy the chemicals business of UCB SA, Belgium's largest drugmaker, for 1.5 billion euros ($1.9 billion) in cash and stock. Cytec shares had their biggest decline in almost a year.

West Paterson, New Jersey-based Cytec will pay 1.28 billion euros in cash and 5.8 million of its own shares valued at 225 million euros, the company said in a statement. The purchase would be Cytec's biggest ever and leave UCB with a 12 percent stake in the U.S. company.

Cytec will double its annual sales and gain manufacturing and research in Asia, Europe and Latin America. Shedding chemicals allows UCB to focus on its faster-growing drug business, which generates half the company's sales and three quarters of its profit.

``The price is right for UCB,'' Petercam analyst Jan van den Bossche said in a telephone interview from Brussels. ``It is at the top of the range of analysts' estimates.'' He has an ``add'' rating on the stock with a target price of 44 euros.

Shares of Cytec Industries fell $3.34, or 6.8 percent, to $45.61 in New York Stock Exchange composite trading, the biggest one-day decline since Oct. 17, 2003. Before today, the stock rose 34 percent in the previous 12 months.

``The acquisition of UCB's surface specialties business will provide us with critical mass,'' Cytec Chief Executive David Lilley said in a statement.

Boosting Revenue

Cytec's 2003 sales of $1.5 billion were about 1/20th those of Dow Chemical Co., ranking it about No. 30 among U.S. chemical makers based on revenue, behind companies including W.R. Grace & Co. and International Flavors & Fragrances Inc.

Adding the UCB business, with 2003 sales of about 1.1 billion euros, or $1.4 billion, would boost Cytec to about the 16th-largest chemical company by revenue in the U.S.

The UCB chemicals business includes resins such as those curable by ultraviolet light, used to coat fiber-optic cable for telecommunication networks. The UCB unit also makes products including pressure-sensitive adhesives for labels, resins for powder coatings, polyurethane coatings to waterproof textiles and additives to control flow in paints.

Brussels-based UCB, which makes the epilepsy drug Keppra and antihistamine Zyrtec, bought Solutia Inc.'s resins business last year for about $500 million to make the chemical unit more attractive to potential buyers.

The Belgian company agreed in May to buy U.K. biotechnology company Celltech Group Plc for 1.53 billion pounds ($2.8 billion), gaining the experimental rheumatoid arthritis drug CDP 870 with potential sales of as much as $1 billion.

UCB Rally

Shares of UCB rose 17 cents, or 0.4 percent, to 43.04 euros in Brussels after trading as high as 45 euros. The shares have gained 44 percent this year.

UCB has risen 23 percent since the company bought Celltech in May and said it would sell some units. UCB previously traded at a discount because it combined chemicals and drugs under one roof and will need positive news about its drug pipeline to maintain the gain in share value, Van den Bossche said at Petercam.

The Belgian company's first-half sales in its pharmaceutical business rose 6.1 percent to 784 million euros. Revenue in the surface specialties, UCB's film and chemicals unit, slipped 3 percent to 750 million euros.

Cytec said it will finance the cash portion of the purchase with a bridge loan, which it plans to refinance with long term debt, and cash in its treasury. After the purchase, UCB agreed to reduce its stake in Cytec within five years.

Rising Profit

The chemical maker had debt of $427 million at the end of the second quarter, when it reported operating profit rose to $45.6 million from $41.3 million a year earlier. Cytec benefited from higher volumes, lower tax rates and higher selling prices.

The company produces building-block chemicals from which it makes composites and adhesives for the aerospace industry, coatings for metal, plastic, and wood, as well as polymer additives, and specialty chemicals used in treating water and in industrial processes.

UCB expects the sale to be completed by the end of December, it said in an e-mailed statement. The unit being sold employs about 2,900 people.

The Belgian company said Bear Stearns International Ltd. was its financial adviser, while Cytec didn't disclose its adviser.

To contact the reporter on this story: Rudy Ruitenberg in Amsterdam at rruitenberg@bloomberg.net.

Last Updated: October 1, 2004 16:32 EDT