updated 1/26/2004 8:02:32 AM ET 2004-01-26T13:02:32

Sanofi Synthélabo, the French pharmaceuticals group, on Monday launched a €48.5bn ($61 billion) hostile takeover bid for Aventis, its larger Franco-German rival, in a daring move to create the third-largest drugs group in the world. 

The bid could meet a frosty reception from Aventis, which has already indicated its opposition to a merger and hired Goldman Sachs, Morgan Stanley and Rothschild to defend itself. The offer values Aventis shares at €60.43, a premium of only 5 per cent from Friday's closing price. 

However, Sanofi said its offer, a mix of 81 per cent shares and 19 per cent cash, was "attractive" as it had a 15.2 per cent premium over Aventis's average share price since the start of January. Rumors of a bid lifted Aventis shares sharply last week. 

If successful, the deal would create a French national champion based in Paris with sales of €25 billion and more than 100,000 employees, which would compete with GlaxoSmithKline for second place in the pharmaceutical industry behind Pfizer. 

The attraction for Sanofi of making a hostile bid now is to use its more highly valued paper to quickly snatch control of its larger rival before a court case later this year over the U.S. patents on Plavix, the blood-thinner that is its second-biggest selling drug. 

If Sanofi loses the Plavix case its shares are expected to fall sharply, making Aventis keener to wait until after the case is settled before agreeing to a merger. Furthermore, a shareholder pact giving the cosmetics group L'Oréal and Total, the oil group, control of Sanofi expires in December, leaving it vulnerable to bids. 

Sanofi has already won the backing of the French government for the merger in spite of the heavy restructuring expected in France. Its bid is conditional on winning 50 per cent of Aventis shares and voting rights as well as gaining regulatory clearance. 

Annual synergies from the deal are expected to reach €1.6 billion, with 10 percent achievable this year, 60 percent in 2005 and the remainder in 2006. Integration and restructuring costs are expected to be about €2 billion. Sanofi said it expected to complete the offer in the second quarter. 

"This major strategic project will enable us to take advantage of our exceptional complementary businesses to create a market leader with strong, sustainable, profitable growth," said Jean-François Dehecq, Sanofi's chief executive. 

Sanofi said it had agreed a €12 billion credit facility with BNP Paribas and Merrill Lynch, which are also acting as its advisers on the bid, to fund the cash part of the deal and refinance some of Aventis's debt. 

Both companies were forced to issue denials that they were in negotiations earlier this month after rumours sent their shares higher. Sanofi said both Total and L'Oréal supported the hostile bid, which was approved unanimously at a board meeting on Sunday. 

Sanofi and Aventis shares were both suspended on Monday morning, while L'Oréal and Total shares both fell in early trading in Paris.

© The Financial Times Ltd 2010. "FT" and "Financial Times" are trademarks of the Financial Times.


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