Novartis ponders tie-up with Aventis
pharmafile | March 8, 2004 | News story | |Â Â Â
Aventis may have found its 'white knight' to save it from a hostile takeover from Sanofi-Synthelabo, in the shape of Swiss pharma group Novartis.
Neither Novartis or Aventis have denied a recent report in the Wall Street Journal suggesting the companies were considering the merits of a takeover/merger which would create a new number two in the sector commanding an 8% market share.
Aventis has maintained that it will 'explore all options' and alternatives to the Sanofi takeover, including a merger with a third party. Now Novartis – which has been keen to merge with fellow Swiss company Roche – may opt for Aventis instead to meet its ambitions for faster growth.
Chief executive Daniel Vasella has turned Novartis into one of pharma's most dynamic companies, with sales expected to achieve 9% for the next three years, driven by strong portfolios in cardiovascular medicine and oncology. Meanwhile the company has made it increasingly clear that it wants to merge with Roche, and has increased its shareholder stake to just below the point where it would be obliged to make a takeover bid. Roche, however, is also growing strongly, and looks likely to change its mind on a merger in the near future.
Seemingly frustrated with Roche's unwillingness to merge, Mr Vasella's preliminary talks with Aventis could yield a new Swiss/French pharma giant which analysts say might deliver even stronger growth for Novartis.
In a briefing note, analysts Deutsche Bank said there were strong arguments for and against a Novartis/Aventis merger, but on balance, predicted it would not come to fruition.
It said Novartis shareholders would be scared off by a possible dilution of top-line growth, increased patent risk as well as a potentially destabilising of a thriving company.
It concluded: "We continue to believe that Roche is Novartis' preferred partner and a deal with Aventis could well preclude a future tie-up with Roche on anti-trust grounds (notably in oncology)."
If Novartis or no other potential white knight makes an alternative offer, Aventis will have to win the battle for the hearts and minds of its shareholders alone. Caught on the back foot by Sanofi's E48 million bid on 21 January, Aventis chief executive Igor Landau is now taking the fight to Sanofi.
The company's first line of resistance has been through the courts, with Aventis challenging the legal status of the takeover bid. France market regulator the AMF has accepted Sanofi's bid, but the court challenge means a shareholder vote cannot proceed until the judge ruling, not expected until late April. The AMF says it will set the closing date for Aventis shareholders to respond to the bid eight days after the court final ruling.
Sanofi says it is confident the offer will close before the second half of the year, a waiting period Aventis is continuing to use to persuade its shareholders not to accept the offer.
Since the takeover bid was launched, Aventis have brought forward the announcement of a number of key business announcements to support its case for remaining independent.
"Aventis shareholders should hold on to their shares as there is greater value ahead," Aventis' Mr Landau said in a statement. "Earnings forecasts for Aventis have been upgraded following our results announcement and we are progressing well on a number of other fronts in our commitment to maximise value."
In a detailed rebuttal of Sanofi's proposal and defence of Aventis' stand alone business, Mr Landau said Sanofi's share-for-share offer clearly undervalued Aventis when the bid was launched, and that share movements meant it was now worth even less. The threat of Sanofi losing a patent challenge to its biggest seller Plavix, lack of clarity on its merger synergy targets and a fall in its growth rate all counted against the company.
In contrast, Aventis says it has five potential blockbuster products to launch before 2006 (compared to Sanofi's one) and that its management experience and greater penetration of the US market will make it one of the fastest growing companies over the next three years.
A number of positive regulatory developments, including the European filing of Exubera, the first ever insulin inhaler (with co-marketers Pfizer) have also boosted the company's defense, but analysts have not entirely been won over by its arguments.
Claims that the buy-out would jeopardise a number of its existing co-marketing deals have been dismissed as unlikely, while they point out that talk of Sanofi's vulnerability to a Plavix patent challenge should be balanced with similar threats to Aventis' Lovenox and Allegra.
Aventis has had the backing from all of its major shareholders in rejecting the bid, but analysts predict that a more generous offer from Sanofi for the company and the seemingly irrefutable logic of consolidation in the sector means the all-French merger remains a likely outcome.
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