Sanofi Inks Deal to Swap Business with Boehringer Ingelheim
June 27, 2016
By Mark Terry, BioSpace.com Breaking News Staff
The paperwork has been signed between Paris-based Sanofi and Germany-based Boehringer Ingelheim, exchanging Sanofi’s Merial animal drugs business with Boehringer’s over-the-counter (OTC) drugs business.
The two companies began negotiations for the deal in December 2015 and is expected to close by the end of this year. Boehringer Ingelheim’s consumer health care (CHC) business, which has an enterprise value of €6.7 billion, will be transferred to Sanofi. Sanofi’s Merial, which has an enterprise value of €11.4 billion ($12.6 billion US), will be handed off to Boehringer. In addition, Boehringer will pay Sanofi €4.7 billion in cash.
“This is a win for Boehringer Ingelheim and Sanofi alike,” said Andreas Barner, chairman of the board of Boehringer Ingelheim, in a statement. “Moreover, it is one of the most significant steps in our corporate history. It demonstrates the consistent orientation of our business towards innovation-driven sectors. As a research based pharmaceutical company, we will substantially enhance our position in the future markets for Animal Health and will prospectively be one of the largest global players in this segment. The similarity in culture and approaches of BI and Sanofi will ensure the business acquired by the other partner will develop well in the future.”
As a result of the deal, Sanofi will increase its consumer healthcare market share to about 4.6 percent. It was also bolster its operations in specific markets in Germany and Japan. Part of Sanofi CEO Olivier Brandicourt’s strategy is to decrease the company’s dependence on a half-dozen key drugs, including Lantus, a treatment for diabetes that recently lost patent protection in the U.S.
Germany will also become a pivotal site for Sanofi’s CHC business, especially in the gastrointestinal and cold-and-cough categories. Sanofi’s well-known existing brands include Maalox and Lactacyd, which will be joined by Boehringer’s Dulcolax and Mucosolvan.
Merial has a number of pet health brands, including Frontline, Heartgard, NexGard, Broadline and Purevax. Its medical brands for farm animals includes Vaxxitek, Eprinex, Ivomec, Longrange, Circovac and GastroGard.
Boehringer’s China business is not included in the deal.
For Boehringer, it will double its sales in the animal health sector to about €3.8 billion, making it the second largest animal care provider globally. Lyon and Toulouse, France will become key operational centers for the German company, keeping operations, research and development, and manufacturing plans in Lyon, and the production facility in Toulouse.
“In signing these contracts, we are meeting one of the key strategic goals of our roadmap 2020, namely to become a leader in consumer healthcare and a leading diversified global human healthcare market,” said Olivier Brandicourt, in a statement. “This business swap will bring a complementary portfolio to our consumer healthcare activity with highly recognized brands, allowing for mid and long term value creation, and enhancement of our market penetration in some major countries.”
The deal has some similarities to 2014’s asset swap between GlaxoSmithKline Plc and Novartis . That was part of a three-way deal in which GSK acquired Novartis’s vaccines business, excluding influenza vaccines, the development of a consumer healthcare joint venture, and the sale of GSK’s oncology portfolio related to research-and-development activities and rights to two AKT inhibitors to Novartis.
Sanofi has also indicated that it will use cash from the deal to buy back shares, which will make the planned transaction neutral to earnings in 2017 and accretive afterwards.