The Aventis-Sanofi Merger: Role of French Government?
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Case Code: BSTR116 Case Length: 17 Pages Period: 1998-2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.500 Organization: Aventis SA and Sanofi SA Industry: Pharmaceutical Countries: France Themes: Mergers Acquisition and Takeovers |
Abstract Case Intro 1 Case Intro 2 Excerpts
"The choice of a merger between Sanofi and Aventis will allow the preservation of decision centers and jobs in France and Europe, and is in line with a strategic interest."
- Jean-Pierre Raffarin, Prime Minister of France.
"The Aventis-Sanofi merger is the product of racism, pure and simple. The French government decided they wanted an all-French drug company, and used the power of the state to keep out a potentially superior offer from a Swiss company located 300 yards from the French border. In the twenty-first century, it's astounding that an industrialized nation would risk the integrity of their markets by resorting to naked economic bigotry."
- Skip Oliva, President of Citizens for Voluntary Trade.
Introduction
On April 26, 2004, Aventis SA (Aventis), the Strasbourg, France headquartered pharmaceutical company announced that it had agreed to merge with its French competitor Sanofi-Synthelabo SA (Sanofi). This announcement came after Sanofi increased its takeover bid price to acquire Aventis. The merger agreement between Aventis and Sanofi brought to an end a three-month battle for acquiring a controlling equity stake in Aventis, between Sanofi and Switzerland based pharmaceutical company, Novartis AG (Novartis). The merged entity, Sanofi-Aventis emerged as the third largest pharmaceutical company (in terms of revenues) in the world, behind only the US based Pfizer Inc. and the UK's GlaxoSmithKline Plc (GSK). According to media reports, this merger was unique because of the proactive role played by the French government in the takeover battle. It virtually pressurized Aventis to accept Sanofi's acquisition bid.
Following the intervention of the French government, Sanofi increased its acquisition bid by 14 percent to €54.5 bn as compared to the previous bid of €47.8 bn. The intervention of the French government to prevent Novartis from acquiring Aventis was not well received by the stock markets. Following the day of merger announcement, the shares of Aventis fell by 5.4 (See Exhibit I) percent to €62.65 while the shares of Sanofi went down by 7.1 percent to €52 (See Exhibit II). Marc Booty, an analyst at Commerzbank said, "Although some selling is routine following a takeover, the sell-offs were compounded by adverse sentiment because of the perception that the French government forced this deal through." Commenting on the general market sentiment, Colette Neuville, President of the Minority Shareholders Defense Association in France said, "Many believe that Aventis should have let the bids and counter bids play themselves out, or at least wait for an effective offer from Novartis. The final price would surely have been higher."...
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