Sanofi plans counterbid for Zentiva

MondayMorning, June 23, 2008

Sanofi Plans Counterbid for Zentiva. French drugmaker Sanofi-Aventis SA plans to make a 40.04 billion crown ($2.6 billion) offer for Czech drugmaker Zentiva, trumping a bid from financial group PPF. The move would take Sanofi deeper into the field of generic drug production, an area which has traditionally been shunned by large pharmaceutical companies but is now receiving increased interest as a way to tap booming emerging markets. Zentiva makes and sells generic drugs in Central and Eastern Europe, including products for pain, cardiovascular diseases and disorders of the central nervous system. Sanofi already a key shareholder in Zentiva with 24.9%--said last week it planned to offer 1,060 Czech crowns per Zentiva share. That pitted Sanofi, whose top-selling drug is the anti-thrombotic Lovenox, against Czech financial group PPF, which formally launched a 950 crown-per-share offer earlier in the week, and analysts said a bidding race may ensue. "Sanofi-Aventis is already established in the various markets where Zentiva operates. The intended acquisition of the control of Zentiva carries a strong rationale," Sanofi said in a statement.

Sanofi offered a premium of about 10.5% to PFF's bid and the French company, which is the world's third-largest drugmaker by sales, said it plans to finalize the acquisition by the end of 2008. "The deal will be slightly accretive (for earnings) from the first year of integration," a Sanofi spokesman said, adding the group would finance the purchase from cash flow. PPF declined to comment on the Sanofi proposal. Zentiva said its board would meet on the new offer and urged shareholders not to take any action for the moment. The Sanofi bid valued the company at 23.2 times forecast 2008 earnings, according to broker Patria Finance, above the Central and Eastern Europe drug sector average of 20.3. Patria advised investors to sell, but some other analysts said PPF may try to drive the price up.