BASEL, Switzerland (Bloomberg) -- Roche Holding AG said it will buy Boehringer Mannheim GmbH, a German drug and diagnostics company, and a majority stake in DePuy Inc. of the US, an orthopaedics product maker, for about $11 billion.

The purchase will make the Swiss drugmaker the largest company in the $19 billion global diagnostics market. And, Roche will become the world's sixth-biggest drug company, up from ninth place. Swiss rival Novartis AG is the world's biggest drugmaker.

Roche, which makes drugs including antibiotic Rocephin and AIDS treatment Invirase, will gain control of Boehringer and DePuy by buying Bermuda-based Corange Ltd., a family-controlled holding company which owns all of Boehringer, and an 84.2 percent stake in DePuy. Roche said DePuy, which claims to be the world's oldest orthopaedics product maker, will continue to operate independently.

Corange is owned by trusts whose main beneficiaries are the family of Conrad Engelhorn, who owns Five Star Island in the Great Sound. Corange has been an active company in the International Companies Division of the Chamber of Commerce and has also been a generous donor to many of the Island's charities and institutions, including the Bermuda Maritime Museum and the Bermuda College. See story below Roche's biggest acquisition in its 101 years comes as drugmakers combine to counter soaring drug development costs. Investors have expected Roche to make a move since Ciba-Geigy AG and Sandoz AG formed Novartis in a $36 billion stock swap last year.

"Everyone has been waiting for Roche to act,'' said Patrick Carisch, a fund manager at Credit Suisse. "It's an unexpected target, but it's a good choice as Roche becomes a world leader in the field, and that's what it's all about.'' Roche dividend right certificates, its most active securities, rose as much as 4.2 percent to a record 13,745 francs, though later pared some of the gains after Roche warned the acquisition will have a negative impact on 1997 earnings. They were recently trading at 13,390 francs, up 200. So far this year, they have gained 31.3 percent.

Roche didn't break down the purchase price. At Friday's closing price of 23 1/2 per share, an 84 percent stake in DePuy, 15.8 percent of which is listed, was valued at $1.95 billion. That suggests Roche is paying $9 billion for Boehringer Mannheim.

Roche Chief Financial Officer Henri Meier said the purchase will lead to a "significant'' earnings dilution in the first year after the acquisition, with an earnings contribution "soon'' after. Meier said Roche will probably pay about 24 or 25 times 1997 earnings for Corange.

"Some people may be a bit concerned about the earnings dilution, but in the long term, the deal makes sense,'' said Thomas Vonaesch, who manages 125 million francs at Bank Sarasin & Cie. "There's lots of cost-saving potential.'' Roche said it will use some of its 15 billion francs in cash to pay for the acquisition, and "probably'' take out a loan for financing, though ruled out a capital increase for the purchase. Meier declined to elaborate.

"This acquisition enables Roche to attain yet another of its goals,'' Roche Chairman and Chief Executive Fritz Gerber told a press conference. "We see long-term potential in the areas of disease management and patient care, (and) Roche also gains market share in the pharmaceuticals sector.'' Market speculation had linked Roche with companies such as Zeneca Plc of the UK, Warner-Lambert Co. in the US or Sweden's Astra AB. Roche has always declined to comment.

Acquiring Boehringer and control of DePuy will be Roche's biggest purchase, topping the $5.4 billion acquisition of Palo Alto, California-based Syntex Corp. of the US in 1994.

Roche is beefing up its drugs and diagnostics unit three months after it agreed to buy Tastemaker, a flavours joint venture of Hercules Inc. and Mallinckrodt Inc. for $1.1 billion. The purchase was concluded last month.

Gerber told journalists that Roche and Corange agreed on the transaction without advice from investment banks, which he said "is a sign of trust'' between the two companies.

Corange had 1996 net profit of $519.7 million, on sales of $4.23 billion, Roche said at a press conference.

Boehringer Mannheim had 1996 net profit of $311 million, on sales of $3.52 billion, Roche said at the press briefing. Operating income amounted to $388 million, Roche said.

Roche said it will reorganise its operations "swiftly'' after it receive clearance for the purchase, which has to be approved by Swiss, European Union, and US authorities.

In the two years after the Syntex acquisition, Roche eliminated about 5,000 jobs at its drugs division.

Roche said it will merge Boehringer's diagnostics unit with its own, creating a division with an annual sales potential of about 3.5 billion Swiss francs ($2.45 billion). Last year, Roche's diagnostics unit had sales of 757 million and was the company's smallest unit in terms of sales.

The new unit, to be called Roche Boehringer Mannheim Diagnostics, will have 13,500 employees. Boehringer's drugs unit had annual sales of about 1.5 billion francs last year, while Roche had drug sales of 10.46 billion francs in 1996.

Roche had total sales of 15.966 billion francs, and posted net profit of 3.9 billion francs. Earnings per share rose to 452 francs in 1996, from 391 francs in 1995.

"Boehringer's established and newly launched cardiovascular and oncology products will be an excellent complement to the Roche product portfolio,'' Roche Chief Operating Officer Franz Humer told a press conference.

In March, Boehringer Mannheim won clearance to market a faster version of its Cardiac T Rapid Assay heart test, which helps to better classify patients with chest pain. In January, the company started selling a new clot-busting heart drug, Retavase to compete with Genentech Inc.'s blockbuster drug Activase.

Roche owns a majority of Genentech.

Boehringer Mannheim has nothing to do with Boehringer In gelheim, another German pharmaceuticals company.

Commenting on the purchase of the majority stake in Warsaw, Indiana-based DePuy, Roche said the company, which was founded in 1895, in which Corange sold a 15.8 percent stake in last August, will continue to operate independently.

In 1996, Warsaw, Indiana-based DuPuy, which was founded in 1895, posted net profit of $106.7 million, on sales of $697.6 million. Roche's Meier said the company had a 1996 operating margin of 27 percent.

By the Numbers Estimated sale price: $10.95 billion Corange 1996 profit: $519.7 million Corange sales: $4.23 billion Roche 1996 profit: 3.9 billion French francs Roche sales: 15.966 billion francs CORANGE chairman Curt Engelhorn