France pours cold water on Novartis talks
pharmafile | March 25, 2004 | News story | |Â Â Â
Merger talks between Swiss pharma company Novartis and Franco-German Aventis could be in jeopardy after the French government indicated its preference for its other suitor, Paris-based Sanofi-Synthelabo.
France Prime Minister Jean-Pierre Raffarin recently indicated that the government would favour Sanofi-Synthelabo's hostile bid, despite its strong rejection by Aventis' management.
"The French government is following developments in the global pharmaceutical industry with particular vigilance. The construction of a large European pharmaceutical group that is profoundly marked by Franco-German relations is strategic for France, the Prime Minister said in a statement. He added: "We will be particularly vigilant in ensuring that these developments do not prejudice our national interest."
When Sanofi-Synthelabo launched its E48 billion bid in late January the French and German premiers Jacque Chirac and Gerhard Schroeder discussed the impact of the proposed merger, which would almost certainly result in job losses at Aventis sites in both countries, but decided not to intervene.
Mr Raffarin made his remarks on the eve of local elections and undoubtedly intended to appeal to popular sentiment, but the governing centre-right coalition was nevertheless punished by voters for high unemployment and industrial action.
Novartis chief executive Daniel Vasella has responded to the remarks by making clear his company interest in Aventis, but demanded that the French government maintain a neutral position.
"We have done our feasibility study and believe the business case looks viable," Mr Vasella said. "But it is clear the implementation risk has increased significantly because of the hostile attitude of the French government.
"We will not enter into negotiations, let alone table an offer, unless we receive a formal invitation from the board of Aventis and are assured that the French government will take a neutral position towards us."
Novartis has made it clear over recent years that it would like to merge with Swiss neighbours Roche, but sustained resistance from Roche key shareholders means Mr Vasella is now seriously considering a merger with Aventis. He admitted that Novartis has drawn up a merger model and that Aventis chief executive Igor Landau has been involved in discussion about how the tie-up would work.
The Swiss company is understood to have produced a model which would allow Aventis some autonomy as well as minimise job losses in France and Germany, a move intended to mollify political opinion in both countries.
Novartis says its 'working hypothesisis' is that Aventis would be preserved as a complete entity but would be downgraded to managing lower-growth, non-core products while Novartis would take on the most promising drugs from both portfolios.
Nevertheless, analysts Deutsche Bank predict that Novartis will walk away from the talks because of the French government's position, and that Sanofi-Synthelabo chief executive Jean-Francois Dehecq, a friend of President Chirac, will make a new, more generous offer to Aventis shareholders in the coming weeks.
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