France's Aventis braced for £35bn hostile bid from Sanofi

Click to follow
The Independent Online

Sanofi-Sythelabo, France's number two drug maker, is this morning set to launch an audacious and unsolicited ¤50bn (£35bn) takeover bid for its larger compatriot, Aventis.

The move from Sanofi is expected to be met with a frosty reception from Strasbourg-based Aventis, which has hired advisers to plot a defence strategy.

The hostile cash and shares bid will shake corporate France to its foundations, and already union campaigners have begun to consider action to minimise the job losses that would be inevitable in any consolidation of the European pharmaceuticals industry.

Observers have long hoped for a friendly merger of the two French groups to create one national champion and put pressure on GlaxoSmithKline, the UK's largest drugmaker, which would be challenged for its number two position in the global industry's sales league table.

Sanofi's bid for Aventis will be 80 per cent in shares and the rest in cash, and the company plans to take a ¤2bn (£1.4bn) restructuring charge should its offer succeed, sources said last night.

Aventis has strong businesses in diabetes and vaccines and a larger sales force in the US, the world's most lucrative drug market. Sanofi, whose best-selling drugs include the Ambien sleeping tablet and Eloxatin for cancer, would gain a significant marketing presence in the US for the first time.

Aventis has annual sales of ¤17bn (£12bn) compared with just ¤8bn for Sanofi, but the latter's growth rate means its shares have a much higher rating and their market valuations are roughly equal, at ¤43bn and ¤46bn, respectively. Sanofi is believed to have made its move now to capitalise on its elevated share price and before a legal ruling later this year on a patent that could wipe out profits from its blockbuster blood-thinner, Plavix.

Union leaders were briefed by Sanofi executives after a company board meeting last night. Earlier in the day Total, the oil company which owns 25 per cent of Sanofi under France's extensive network of cross-holdings, had met to discuss the bid plan. Its meeting came a day after a similar gathering of executives from L'Orèal, the cosmetics group which owns 19 per cent of Sanofi.

The French Government has already signalled that it is unlikely to stand in the way of a combination. The French finance minister Francis Mer said on Saturday he favoured an all-French deal and Brussels is also likely to back the creation of a pharmaceutical leader within the eurozone.

Aventis insiders stressed this weekend that there was a strong cultural fit between the company and Sanofi but that an unsolicited bid at the present time was likely to be fought on valuation grounds.

Sanofi itself had seemed certain to become a bid target after the end of this year, when Total has indicated it plans to sell down its stake.

Lazard is advising Sanofi on the takeover, while Morgan Stanley and Goldman Sachs were appointed on Friday to help Aventis to fight off the approach or at least to squeeze a better price.

Analysts have speculated in recent days that a successful combination of Sanofi and Aventis could trigger another wave of consolidation in the global pharmaceuticals industry, which remains relatively fragmented. Even Pfizer accounts for little more than 10 per cent of world sales.

Shareholders in GSK are likely to take a dim view of any attempt by the company to take part in large-scale merger activity, when the focus is currently on the growth that might be achieved from its own internal pipeline of new drugs.

AstraZeneca, a second-tier drug company, has been tipped as a potential white knight for Aventis and is watching developments, although executives have always put the emphasis on organic growth.

Last week, Switzerland's Novartis made another small move towards the acquisition of Roche, raising its stake slightly to more than 32 per cent.