French lean on Aventis for Sanofi deal

FRANCO-German drugs giant Aventis, bowing to French government pressure, has accepted an improved e55.3bn(£37.1bn) takeover offer from rival Sanofi-Synthelabo, giving birth to the world's third-largest pharmaceuticals company after Pfizer of the US and Britain's GlaxoSmithKline.

The combined company will have a market capitalisation of around e90bn and a stable of leading drugs including Sanofi's stroke-prevention treatment Plavix, sleeping pill Ambien and cancer therapy Eloxatin.

To this will be added Aventis's allergy pill Allegra, anti-blood-clotting drug Lovenox and cancer medicine Taxotere.

Shares in both Sanofi and Aventis were suspended pending an announcement.

Sanofi today confirmed it had raised its offer. The new terms are five Sanofi shares and e120 for every six Aventis shares, with an all-share alternative of 1.1739 Sanofi shares for every one Aventis or e68.93 in cash. The offer is 71% shares and 29% cash.

The deal, agreed three months to the day after Sanofi launched a hostile e48.5bn bid on 26 January, is a bitter blow to Swiss rival suitor Novartis, which agreed to open talks with Aventis about a possible 'white-knight' bid last Thursday.

Novartis has also been consistently rejected by compatriot Roche, in which it holds a third of the voting stock, in its efforts to merge.

But it is a triumph for Nicolas Sarkozy, France's new Finance Minister, who called in Sanofi boss Jean-Francois Dehecq and Aventis executive chairman Igor Landau on Friday and told them to start talking.

French Prime Minister Jean-Pierre Raffarin stymied the chances of a Novartis bid by declaring a foreign tie-up would be 'against the national interest'. He could scarcely disguise his glee at the outcome.

'The choice of a merger between Sanofi and Aventis will allow the preservation of decision centres and jobs in France and Europe, and is in line with a strategic interest,' Raffarin said in a statement issued before the terms of the deal - or even confirmation of the deal itself - were released.

Aventis chief Landau is now expected to resign from the company with a golden parachute estimated at e25m with Sanofi's Dehecq taking over the reins of the new firm. The rest of the board will be made up 50-50 from Sanofi and Aventis.

The threat of a bid by Novartis put pressure on Sanofi to improve its offer, and Novartis said 'the strong intervention of the French government' deterred it from doing so.

Novartis's decision to walk away helped its shares to rise by nearly 4% today.