Sanofi eyes Zentiva in quarter-stake buyout

By Gregory Roumeliotis

- Last updated on GMT

Related tags Sanofi Sanofi-aventis Novartis Generic drug

Looking to establish itself in Eastern Europe, French drug maker
Sanofi-Aventis has bought a 24.9 per cent stake in Czech generic
drug firm Zentiva for $514.7m (€430m).

With a workforce of more than 4,200, Zentiva has manufacturing sites in the Czech Republic, Slovakia, and Romania and is growing rapidly in Poland, Russia and the Baltic states, thus proving attractive for Sanofi, which is seeking better access to those markets and wants to strengthen its generics division, Winthrop Medicines.

The acquisition will not allow the two companies to consolidate, but Sanofi, the world's third-largest pharmaceuticals firm, said they will set up a "joint strategic committee to explore future development and investment opportunities."

On the other hand, Zentiva, which like Sanofi has a particular focus on cardiovascular disorders and the central nervous system, will try to find ways to support the development of its business into Western European markets by using Sanofi's "pharmaceutical expertise and its much broader European presence,"​ the Prague-based company said.

Born in 2003 through the merger of the Czech company Leciva and Slovak firm Slovakofarma, Zentiva is Eastern Europe's third-largest drugmaker by market value and aims to grow further not just through existing business, but also from selective acquisitions, such as this of Romanian drugmaker Sicomed, where Zentiva bought a controlling stake last year.

While Sanofi also wants to expand its generics business, company spokesman Jean-Marc Podvin stressed to​ that Winthrop has no ambition to become like Israel's Teva Pharmaceuticals or Novartis-owned Sandoz of Switzerland.

"We are mainly a maker of patented drugs and not copycats, we are not going to integrate operations with Zentiva but look for opportunities where those exist, benefiting from their manufacturing facilities for example,"​ he said.

"At the time of our inception we outlined our strategy of no small countries and no small drugs, so the acquisition passed this important test for us."

It is the first acquisition for Sanofi since it was created in 2004 by a takeover of Aventis by rival Sanofi-Synthelabo and follows several takeovers in the generics market, including those of Hexal and Eon Labs by Novartis for $8bn and of Ivax by Teva Pharmaceuticals for $7.4bn, making 2005 a record year for such deal-breaking.

Earlier this month Croatian generics drug maker Pliva rejected a $1.6bn buyout offer from Iceland's Actavis, claiming it undervalued the company.

There is much at stake in the generics market, set to grow at about 22 per cent a year to $100bn by 2010, as governments and health insurers try to keep down expenses.

"We are delighted to announce that Sanofi-Aventis has become the company's largest shareholder,"​ Jiri Michal, chairman and CEO of Zentiva, commented.

"This transaction will allow us to create a long term relationship with Sanofi-Aventis which will enable us to accelerate and support the growth of Zentiva in our core countries based on the strategy that we set out at the time of our IPO in June 2004."

Sanofi bought the shares from private-equity firm Warburg Pincus and managers and staff of Zentiva, while under the terms of the agreement Zentiva's senior management will continue to own approximately 5.9 per cent of the company and has agreed for a period of two years not to sell those remaining shares.

The Paris-based company said it has currently no intention of increasing its Zentiva stake.

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