Royal DSM N.V., headquartered in Heerlen, The Netherlands, North China Pharmaceutical Group Corporation Ltd. (NCPC GroupCo) of Shijiazhuang, Hebei Province, People's Republic of China, NCPC ListCo, the listed affiliate of NCPC and the state-owned Assets Supervision and Administration Commission of the State Council (SASAC) of Hebei Province announced a further detailing agreement confirming the terms of further cooperation between NCPC and DSM via investments by DSM in NCPC GroupCo as well as in NCPC ListCo and the establishment of two joint ventures in the areas of nutritional products (especially vitamin C and B12) and anti-infective products (especially beta lactam antibiotics).

This agreement is the follow-up to the announcements made at the end of 2004. As part of the overall strategic cooperation, DSM will make a strategic investment in NCPC by obtaining a minority share in NCPC GroupCo. Under the terms of the agreement, DSM also intends to acquire a minority stake in NCPC ListCo, an affiliate of NCPC, listed on the Shanghai stock exchange. In addition, DSM will obtain a 49% controlling interest in the two joint ventures for nutritional products and anti-infectives. These joint ventures will be based in Shijiazhuang, Hebei Province. Sales are expected to start at approximately $275 million/year.

The total cash investment of DSM in the deal is $164 million. In addition, DSM will contribute to the joint ventures with technology and management capabilities. NCPC will bring into the joint ventures their existing factories producing vitamin C and B12 and beta lactam antibiotics, as well as their marketing and sales force, which is also geared toward the fast-growing domestic markets in China. The combination of capabilities and competencies of DSM and NCPC, the companies expect, will lead to the world's best possible combination of technologies and low-cost manufacturing whilst securing high quality and benefiting from the global DSM sales network.

The agreement was signed by Chang Xing, chairman of NCPC Group, and Feike Sijbesma, member of DSM's managing board, in the presence of Ji Yunshi and Fu Shuangjian, respectively governor and vice governor of Hebei Province, with the full support of Bai Keming, party secretary of Hebei Province.

The overall strategic cooperation is expected to bring significant benefits to both parties, who now intend to work together toward obtaining the necessary approvals for the strategic partnership as soon as possible.

Peter Elverding, chairman of DSM's managing board, commented, "This is a major step for DSM in the context of Vision 2010 -- Building on strengths. It serves three key strategic targets: strengthening our nutritional products as well as our anti-infectives portfolio and expanding our presence in the emerging China market. The overall strategic partnership with NCPC provides an accelerated growth path into the Chinese nutrition and pharma market, and it will significantly contribute to our target of doubling sales in China to $1 billion in 2010."