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Aventis invites Novartis 'white knight' bid

Published on 07/04/04 at 05:14pm

Aventis has formally invited Swiss rival Novartis into merger talks, but still needs to convince the French government of the merits of such a tie-up.

French Prime Minister Jean-Pierre Raffarin has indicated the government might attempt to block the merger in favour of Sanofi Synthelabo's E47 billion hostile takeover bid for the Franco-German company.

Aventis is now lobbying ministers not to stand in the way of the deal, which it says would create a company that would rank number two in the world and number four in the US, with a focus on cardiovascular, oncology, vaccines and metabolism therapeutic areas.

Chairman and vice chairman of the Aventis supervisory board Jurgen Dormann and Jean-Rene Fourtou said in a joint statement: "We are inviting Novartis to enter negotiations because we believe that such a combination would offer significant advantages for Aventis shareholders and employees."

From the outset, the issue has been framed in national, rather than business terms, with Berlin concerned about the loss of German jobs if Sanofi's bid for Aventis (itself formed from a 1999 combination of Germany's Hoechst Marion Roussel and France's Rhone-Poulenc Rorer) were to succeed.

Novartis said it had conducted a feasibility study that showed there was a viable business case for its combination with Aventis. After a merger, Novartis plans for non-core products from both companies to be spun-off into a newly created company, while the main business would handle more promising brands. The proposal was devised with one eye on appeasing concerns in France and Germany about redundancies, but some job losses will result whichever company wins out.

French health minister Philippe Douste-Blazy recently reiterated the French government's stance, telling Le Journal du Dimanche: "We defend French industry. When we have the chance to be able to create one of the world's biggest pharmaceutical groups in our country we have to take it."

Outright intervention in the proceedings could bring France into conflict with the European Commission, which can review any government blocking of takeovers on any grounds other than pubic order or national security.

Since Sanofi announced its bid in January, Aventis has remained steadfast in its opposition, recently taking its fight to shareholders with a brochure telling them to "say no to the Sanofi offer: there's greater value ahead".

Aventis also plans to issue equity warrants to its shareholders to protect them from Sanofi's bid because of the risk of it losing patent protection on Plavix and the damage this would do to shareholders' Aventis stock if Sanofi's takeover bid were successful. The drug is Sanofi's biggest earner and could face generic challenges by the end of 2004.

Issuing the warrants - Aventis proposes to give one to shareholders for each Aventis share they hold - could make it harder for Sanofi's bid to succeed by potentially increasing the number of shares it would have to obtain.

If all the warrants were exercised they would allow new shares representing about 22% of Aventis' share capital to be issued.

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