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Pharma giants Sanofi and Boehringer negotiate deal to swap assets

Published on 15/12/15 at 09:53am
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Two of the world’s biggest pharma companies – Sanofi and Boehringer Ingelheim – have entered into exclusive negotiations to swap businesses.

The proposed transaction would consist of an exchange of Sanofi’s €11.4 billion animal health business, Merial, with Boehringer Ingelheim’s consumer healthcare (CHC) business, which is worth €6.7 bn. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of €4.7 bn. The deal is expected to close in the fourth quarter of 2016, if approved by regulators.

Boehringer Ingelheim says it will maintain its business operations, R&D and manufacturing centres in France, including an animal health plant in Lyon, and “pay particular attention to sustain the momentum of US operations.” Germany will become “a key centre” for Sanofi’s consumer health business, the French firm says.

The deal would mean Sanofi would become a global leader in consumer healthcare, while making Boehringer Ingelheim the world’s second largest animal health company. However, Boehringer’s CHC business in China would be excluded from the transaction.

Sanofi says it expects to earn sales of approximately €5.1 billion in 2015 and has a global market share close to 4.6%. However it will be able to add sales from the Boehringer Ingelheim CHC business (excluding China) of about €1.6 bn for 2015. Sanofi is also looking to improve its position in countries, such as Germany and Japan, where Sanofi’s presence in consumer healthcare is limited, and expand its global presence in the area by gaining access to BI’s brands in antispasmodics, gastrointestinal drugs, painkillers, and coughs and cold medicines.

On the other side of the deal, in the animal health industry – seen as very attractive industry in terms of innovation, growth potential and profitability – combining Merial with Boehringer Ingelheim's animal health unit, which had sales of approximately € 3.8 bn in 2015, will give BI “the ability to compete for global market,” the German firm says.

"Boehringer Ingelheim's strategic priority is to focus on the company's core areas of expertise and businesses with an established global scale, or where a pathway to a global scale can be achieved and prioritised among Boehringer Ingelheim's portfolio opportunities," says Andreas Barner, chairman of the Boehringer Ingelheim board. "I am confident that Sanofi will enable our CHC business to fully live its potential supported by highly professional and committed teams."

Speculation grew over recent months that Sanofi has been looking to diversify, and chief executive Olivier Brandicourt was said to be considering divesting Merial during a restructure to achieve his five-year strategic vision for the company.

Brandicourt says: "In entering into exclusive negotiations with Boehringer Ingelheim, we have acted swiftly to meet one of the key strategic objectives of our roadmap 2020, namely to build competitive positions in areas where we can achieve leadership. This transaction would allow Sanofi to become a world leader in the attractive non-prescription medicines market and would bring a complementary portfolio with highly recognised brands, allowing for mid and long term value creation."

Lilian Anekwe

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