Escape routes diminishing for Aventis
pharmafile | February 12, 2004 | News story | | Sanofi-Aventis, acqisition, merger
Aventis’ chances of sidestepping the hostile takeover bid from Sanofi-Synthelabo are looking increasingly less likely as the ‘alternative scenarios’ it had hoped for fail to materialise.
Chief executive and chairman of Aventis Igor Landau has made his feelings about the E48 billion takeover bid abundantly clear, saying it ‘fundamentally undervalues’ the company, adding: “Their hostile bid is a cheap attempt to transfer their risks to our shareholders. It is very clear: they need us, we don need them.”
Despite the strength of Mr Landau’s defence, and predictions for solid growth in 2004, a number of influential factors look to be turning in Sanofi’s favour. Firstly, the largest shareholder in Aventis, the Kuwait Petroleum Corporation (KPC) holds a 13.5% stake and is understood to be open to negotiation with the prospective buyer.
As Pharmafocus went to press, KPC representatives were due to meet Sanofi chief executive Jean-Francois Dehecq, almost certainly with the aim of seeing how far the company would increase its offer for Aventis, which the oil company is understood to no longer consider a core asset.
The value of Sanofi’s bid has fallen slightly with its share price, and now stands at around E58 per share. Analysts predict the company will raise its offer to around E65 to secure the deal.
Meanwhile, the two companies which control a majority stake in Sanofi – L’Oreal and TOTAL – have backed its takeover bid, and have indicated they would block any attempts for a hostile bid on Sanofi.
Rumours had circulated that Pfizer was preparing its own bid for the Paris-based company, but David Shedlarz, Pfizer’s chief financial officer stated that it had no plans for large acquisitions in the short-term.
AstraZeneca, GSK, Novartis and Roche have all been mooted as potential ‘white knights’ to buy-out Aventis from under the nose of its smaller French rival, but Mr Landau has refused to comment on whether any talks are currently being held with third parties. Few analysts expect these shortlisted European companies to make an offer, all preferring to concentrate on organic growth; the same strategy Aventis says it can more profitably pursue.
One of the key assets coveted by Sanofi is Aventis’ considerable US salesforce, which the company has been building for the last four years to make the most of the world’s biggest market, where it now earns 40% of its sales.
Making a counter-attack on the logic of the Sanofi bid, Mr Landau says the merged group would shift its focus back to the slow-growth markets of Europe, potentially slowing its potential for growth.
“From Aventis’ point of view, it is a backward step in terms of strategy,” he told investors at the annual results meeting. He also poured scorn on Sanofi’s estimate of E1.6 billion savings from the merger, saying: “I am still trying to understand how much, where and how they will get them.”
Unfortunately for Mr Landau, it seems another potential obstacle to Sanofi – political resistance in Aventis’ home territories of France and Germany – has waned after initial alarm.
France President Chirac and Germany’s Chancellor Schroeder have discussed the repercussions of a merger including the inevitable downside of job losses and have concluded it should remain a matter purely for the companies.
This ensures that Aventis’ shareholders will have the final say in its fate, and both sides are keen to win their support with promises of strong return on investment.
Aventis has brought forward some good news from its development pipeline to bolster its outlook, revealing that the FDA has granted its new melanoma treatment Genasense priority review status.
Meanwhile cosmetic treatment Sculptra dubbed a “facelift in a bottle” by chief financial officer Richard Markham is expected to be approved and launched by the summer, with peak sales estimated in excess of $1 billion.
The company will also launch antibiotic Ketek in the US and fast-acting insulin Apidra worldwide this year. Mr Landau said these drugs were the tip of the iceberg, with a total of 94 new chemical entities and vaccines in development, and said investors could expect to see average sales growth of 10 to 11% in the 2005-2007 period.
“Sales growth should accelerate post-2004 due to the launch of several new products: Ketek in the US, plus Genasense, Apidra and Sculptra in 2004, followed by Menactra, Alvesco, Adacel and Exubera,” Mr Landau announced at the results meeting.
“In parallel, sales growth should also be enhanced by the disposal of a significant part of the ‘non-strategic’ products representing sales of up to E1.5 billion. As a result, sales between 2005 and 2007 are expected to grow 10 to 11% annually.
“During the same period, earnings per share should grow by 13 to 15% as a result of our sales growth, continuous productivity improvement measures and the implementation of a new share buyback programme of E2 to E3 billion in 2004 and 2005.”
Talking to the weekly newspaper Le Journal du Dimanche, Mr Landau added: “Tme very clearly plays in our favour. Based on our excellent 2003 results and our growth forecasts, our shareholders will be more and more able to appreciate the value of Aventis.”
Sanofi has, however, been preparing its takeover bid since the autumn, and is ready for a number of possible scenarios. France’s competition watchdog is expected to give final clearance for the company’s bid very shortly, after which time Aventis has just five working days to publish a defence document – a short time indeed if shareholders are won over by a raised bid from Sanofi.
Related articles:
Sanofi makes takeover bid for ‘weakened’ Aventis
Monday , February 02, 2004
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