The Aventis-Sanofi Merger: Role of French Government?

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"The choice of a merger between Sanofi and Aventis will allow the preservation of decision centers and jobs in France and Europe, and is in line with a strategic interest." ¹

- Jean-Pierre Raffarin, Prime Minister of France.

"The Aventis-Sanofi merger is the product of racism, pure and simple. The French government decided they wanted an all-French drug company, and used the power of the state to keep out a potentially superior offer from a Swiss company located 300 yards from the French border. In the twenty-first century, it's astounding that an industrialized nation would risk the integrity of their markets by resorting to naked economic bigotry." ²

- Skip Oliva, President of Citizens for Voluntary Trade.

Introduction

On April 26, 2004, Aventis SA (Aventis), the Strasbourg, France headquartered pharmaceutical company announced that it had agreed to merge with its French competitor Sanofi-Synthelabo SA (Sanofi).

This announcement came after Sanofi increased its takeover bid price to acquire Aventis. The merger agreement between Aventis and Sanofi brought to an end a three-month battle for acquiring a controlling equity stake in Aventis, between Sanofi and Switzerland based pharmaceutical company, Novartis AG (Novartis).3 The merged entity, Sanofi-Aventis emerged as the third largest pharmaceutical company (in terms of revenues) in the world, behind only the US based Pfizer Inc.4 and the UK's GlaxoSmithKline Plc (GSK).5 According to media reports, this merger was unique because of the proactive role played by the French government in the takeover battle. It virtually pressurized Aventis to accept Sanofi's acquisition bid.

Following the intervention of the French government, Sanofi increased its acquisition bid by 14 percent to €54.5 bn⁶ as compared to the previous bid of €47.8 bn. The intervention of the French government to prevent Novartis from acquiring Aventis was not well received by the stock markets.

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1] 'Aventis and Sanofi Set for Merger,' BBC Online Network, April 26, 2004.

2] 'French Government Forces Aventis-Sanofi Merger,' www.voluntarytrade.org, April 26, 2004.

3] Headquartered in Basel, Switzerland, Novartis is a leading pharmaceuticals and consumer health company in the world. It was formed in 1996 after the merger of two Swiss companies - Ciba and Sandoz. In the fiscal 2003, Novartis reported revenues of US $24.9 bn and a net income of US $5 bn. Novartis employs about 78,500 people and operates in over 140 countries across the world.

4] Pfizer is the largest pharmaceutical company in the world. For the fiscal year ending December 31, 2003, the revenues and net income of Pfizer amounted to $45.188 bn and $3.91 bn respectively. The company operates in two business segments - Pharmaceuticals and Consumer Products.

5] Headquartered in UK, GSK is one of the world's leading pharmaceutical companies with an estimated seven percent share of the world's pharmaceutical market. In the fiscal 2003, GSK had sales of £21.4 bn and profit before tax of £6.7 bn.

6] As on May 14, 2004, 1 US$ = €0.84624.

7] 'Investors balk after drug-maker merger,' www.floridatoday.com, April 26, 2004.

8] 'Sanofi and Aventis agree to merger,' www.newsobserver.com, April 27, 2004.