Drug Maker Aventis Accepts $65.5 Billion Takeover Offer 

HEATHER TIMMONS / NY Times 26apr04

LONDON, April 26 — The French-German drug company Aventis said this morning that it had accepted an offer from a once-hostile bidder, Sanofi-Synthélabo, of 55.3 billion euros ($65.5 billion), 14 percent higher than Sanofi's original bid in January.

The new company will be called Sanofi-Aventis, despite the fact that Aventis is about twice as large as Sanofi, and the Sanofi chairman and chief executive, Jean-François Dehecq, will be chairman of the management committee. The committee will be split equally between Aventis and Sanofi executives.

"We are pleased to have reached an agreement that recognizes the value of Aventis from a financial standpoint, as well as the talent and expertise of our employees," the Aventis chairman and chief executive, Igor Landau, said in a statement this morning.

The action came four days after the Swiss drug company Novartis said it would begin formal talks with Aventis about a merger. Novartis said Sunday night that it would withdraw its offer because none of its conditions for a deal had been met.

"Following Aventis' decision to engage in discussions with Sanofi, at the strong intervention of the French government, Novartis decided not to proceed," the company said in a statement today.

The agreement with Sanofi, based in Paris, satisfies the French government's quest to make sure France remains home to a large pharmaceutical company.

The combined Aventis and Sanofi will be the world's third-largest pharmaceutical company, behind Pfizer and GlaxoSmithKline, with about $30 billion in sales in 2003.

The higher offer represented a shift for both Sanofi, which had steadfastly refused to alter its $60 billion bid for Aventis, made in January, and for Aventis, which had insisted that it would be a stronger company if it did not combine with Sanofi.

Sanofi is offering five of its shares, plus 120 euros ($142), for each six shares of Aventis stock, said a person close to the negotiations. The previous offer was five shares of Sanofi stock plus 69 euros for each six Aventis shares. Sanofi is offering 1.66 newly-issued American Depository Receipts and 20 euros for every Aventis American Depository Receipt.

Thirteen of the 16 members of Aventis's board voted to approve the deal, after a seven-hour board meeting on Sunday. Two employee representatives on the board voted against the deal, and Kuwait Petroleum Corp., the company's largest shareholder, abstained. Even as the board was meeting, French government officials, who have been eager to have Aventis remain a French company, were promoting the benefits of a combination with Sanofi.

The French health minister, Philippe Douste-Blazy, said in an interview Sunday evening with French radio's Europe One that he favored a bid for Aventis by Sanofi over an offer by Novartis.

"I would be very happy to see the formation of a very big French group, among the biggest in the world," he said, according to news agency reports.

On Sunday night, Mr. Douste-Blazy welcomed the deal even before it was formally announced, saying it would allow France to have "one of the largest pharmaceutical groups in the world," according to Agence France-Presse.

Separately, Sanofi's bid for Aventis is expected to be approved by the European Commission today, according to a person close to the situation. Sanofi has been trying to pre-empt any regulatory concerns about the combination in recent weeks.

On April 13, Sanofi said it would sell the blood-thinning drugs Arixtra and Fraxiparine, as well as the manufacturing plant in northern France that makes them, to GlaxoSmithKline, if the bid for Aventis was successful.

Since Sanofi made its original bid, Aventis shareholders and executives have asserted that the offer undervalued the company. Aventis's stock has risen steadily since then, on hopes that Sanofi would raise its bid, or a white knight would enter the battle.

Aventis closed Friday at 66.80 euros on the Frankfurt exchange, 15 percent higher than the value of the original Sanofi offer.

The French government may have played an instrumental part in orchestrating the new bid.

On Friday, Aventis's chairman and chief executive, Igor Landau, met with the Sanofi chairman, Jean-François Dehecq, at the behest of the French finance minister, Nicolas Sarkozy. Neither the government nor representatives from either company provided any details about what happened, but it was the first time that the two executives had met since Sanofi began its hostile offer. Previously, Mr. Landau has been highly critical of Sanofi's prospects.

Markets will be closely watching the European Commission's response to the news. Previously, the commission's intervention in pharmaceutical deals has been confined to asking companies to sell some products. Speaking during a daily news media briefing on April 22, a spokeswoman, Amelia Torres, noted that the European Commission had never turned down a pharmaceutical merger.

It has delayed the closing of some pharmaceutical deals, though. Pfizer said in July 2002 it would buy Pharmacia in a $60 billion deal, but the deal closed several months after its target of the end of 2002, because European antitrust regulators requested more information from both companies. Ultimately, Pfizer was forced to sell an incontinence treatment, darifenacin, to Novartis for $225 million, in order to close the deal, because Pharmacia already had two incontinence drugs.

Ms. Torres said in an interview on Thursday that if the French government tried to interfere in any deal between Novartis and Aventis, the European Commission would study whether that action was legitimate.

Paul Meller contributed reporting from Brussels for this article

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