The takeover bid brings to an end weeks of speculation and escalating share prices at both companies, as investors got excited at the prospects of a combined pipeline and plenty of opportunities for cost-cutting.
Sanofi's preliminary offer - and analysts have suggested this could only be an opener - values Aventis at €47.8 billion or €59.63 per share, and would involve shareholders exchanging five Sanofi shares and €69 in cash for every six Aventis shares held.
An alternative offer is also on the table, in which it would swap 35 of its shares for 34 Aventis shares at a value of €60.43 a share. Aventis' shares closed on Friday at €57.55.
A merging of the two entities would create one of the largest drugmakers in the world by sales, surpassing the likes of AstraZeneca and GlaxoSmithKline to make a Sanofi/Aventis amalgamation, with an estimated market capitalisation of around $100 billion, the leading drugmaker in Europe and second only in the world to US giant Pfizer.
Just a couple of years ago Aventis was regarded as having one of the most promising pipelines in the pharmaceutical industry, but some late-stage product disappointments have left its larder looking a little bare. And both Aventis and Sanofi are facing patent challenges to big-earning cardiovascular drugs.
Aventis has had a generic challenge to its big-selling anticoagulant Lovenox/Clexane (enoxaparin). Last year, the company filed suit against Teva Pharmaceuticals and Ampastar Pharmaceuticals in the US, in a bid to block their applications to market copies of the product. Sales of the drug were €1.2 billion in the first nine months of 2003, with €744 million of that total coming from the US market.
Doubts have also been raised over the strength of Aventis' business after press reports last year outlined details of an internal company document leaked to the media. This detailed €500 million in cost savings, apparently intended to help the company bolster its pipeline by freeing up cash for licensing deals.
Meanwhile, the patents on Sanofi's antithrombotic Plavix/Iscover (clopidogrel), co-marketed with Bristol-Myers Squibb, have been challenged by Indian company Ranbaxy Pharmaceuticals. Plavix had sales of €1.33 billion last year.
Sanofi said the merger with Aventis would enhance its net profit as of 2004, and would provide synergies of around €1.6 billion a year, with the cost of integration estimated at €2 billion. It said the merger is fully supported by its board and its main shareholders Total and L'Oreal, which jointly own 44 per cent of the drug company, and should be completed in the second quarter of this year.
Aventis says no
Aventis rejected the bid in a statement issued this afternoon, saying that Sanofi's approach "does not take into account the wide range of risks associated with this move".
Noting that the offer comprises a premium of 3.6 per cent over the last closing price of Aventis shares, the Franco-German company said the proposal "is not in the best interest of its shareholders, because it offers inferior value compared to the achievement of the current stand-alone strategy".
Aventis also said that it would compel its shareholders to assume significant risks associated with Sanofi's main products.