The Health Care M&A Monthly: O La La: Sanofi Launches Hostile Bid for Aventis Worth $61 Billion

Hostile bids in the Pharmaceutical sector are rarer than hen’s teeth. So rare in fact that only one comes readily to mind, Pfizer’s (NYSE: PFE) $90 billion acquisition of Warner-Lambert in mid-2000. And even then, what began as a hostile bid in late 1999 turned friendly within three months.
Such bids are uncommon, so the common wisdom goes, because the value of pharma companies is often tied to factors that are unpredictable and opaque to outsiders, increasing the riskiness of pursuing a hostile takeover.
Those factors include the length and uncertainty of outcomes surrounding clinical trials, patent expirations and patent challenges by generic drug makers, as well as the potential loss of scientific talent, as happened during the year it took GlaxoSmithKline (NYSE: GSK) to carry out the integration of its two predecessor companies.
Even though hostile bids are not likely to become a staple of big pharma’s tools for growth, they may occur from time to time, and when they do, they will stir up the M&A market.
In what could be the largest health care transaction for 2004, the French pharmaceutical company Sanofi-Synthélabo, SA (NYSE: SNY) launched a hostile bid on February 17 to acquire its Franco-German rival Aventis, SA (NYSE: AVE) in a transaction valued at nearly $61 billion.
This combination would create Europe’s largest pharmaceutical company, one with some 60 projects in late-stage development. In global terms, the combined company would be the world’s third-largest, pure-play pharmaceutical company in terms of revenue, displacing Merck & Co. (NYSE: MRK) from that position. The only pure-play pharma companies ahead of it would be number one Pfizer and number two GlaxoSmithKline.
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