Novartis hangs back from Aventis bid

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Related tags: Aventis, Sanofi-aventis, Switzerland

Switzerland's Novartis has confirmed that it is interested in
joining with Aventis, but will not proceed with a formal bid unless
the French government draws back from its hostile stance on a
link-up, reports Phil Taylor.

Aventis, headquartered in Strasbourg, France, is currently the subject of an unsolicited €46 billion takeover bid from fellow French firm Sanofi-Synthelabo.

Interestingly, Novartis is contemplating not a simple merger, but a marriage which would see the formation of a new spin-out company and, it claims, preserve jobs in both France and Germany.

The spin-off company would take the non-core drugs of the combined group and would be modelled on Forest Laboratories​ of the US, which specialises in licensing and marketing niche pharmaceuticals, and has nearly tripled its turnover between 2000 and 2003 (to $2.23 billion; €1.81bn) in the process.

The off-loaded products would include speciality drugs and those close to losing patent protection, which could function well in a smaller, leaner company without the overheads of a pharmaceutical major, according to the Swiss firm.

Novartis went public with its deliberations yesterday afternoon, following a second request from the French stock market authority, the AMF, to clarify its position regarding an acquisition of Aventis.

But Novartis insists that although the business case looks viable, the negative attitude of the French government has influenced its consideration to a point that it will only enter into a negotiation phase if formally invited by the Aventis board - and if the French government assumed a neutral position.

But local press reports in France suggested that the government is unlikely to change its view as it is in favour of an all-French deal. It has come out strongly in favour of an Aventis/Sanofi merger, as it believes it is in the country's interest to maintain a strong national pharmaceutical player.

Novartis also stated that neither negotiations nor discussions about the price it would offer for Aventis have taken place. While some analysts said the statement was a way to withdraw from the melee gracefully, others noted that the company has plenty of time to mull over its position, as a court case exploring the legality of Sanofi's bid is not due to reach a conclusion for two months.

A Sanofi-Aventis marriage would create the world's third largest pharmaceutical company in sales terms, behind US giant Pfizer and the UK's GlaxoSmithKline. But a Novartis-Aventis tie-up would leapfrog GSK into second place, with combined revenues of €38 billion.

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