June 18, 2008 / 6:13 AM / 9 years ago

Sanofi plans $2.6 billion counterbid for Zentiva

PARIS/PRAGUE (Reuters) - French drugmaker Sanofi-Aventis (SASY.PA) plans to make a 40.04 billion crown ($2.6 billion) offer for Czech drugmaker Zentiva ZNTVsp.PR, 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.

Sanofi -- already a key shareholder in Zentiva with 24.9 percent -- said on Wednesday it planned to offer 1,050 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 on Tuesday, and analysts said a bidding race may begin.

“Sanofi-Aventis is already established in the various markets where Zentiva operates. The intended acquisition of the control of Zentiva carries a strong strategic rationale,” Sanofi said in a statement on Wednesday.

Shares in Zentiva, which makes copies of drugs like paracetamol and ibuprofen, rose 7.4 percent to close at 1,117 crowns, above both bids and the stock’s highest level since October 2007. It was the biggest gainer among large capitalization shares in central Europe.

Sanofi rose 1.05 percent to 42.63 euros by 1524 GMT.

Sanofi offered a premium of around 10.5 percent to PPF’s bid and the French company, which is the world’s third-largest drugs maker 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-Aventis spokesman said, adding the group would finance the purchase from cash flow.

PPF said it may comment on the Sanofi counterbid later in the day.

ZENTIVA SAYS HOLD OFF

Zentiva said its board would meet on the new offer and urged shareholders not to take any action for the moment. On Tuesday Zentiva told shareholders to take no action on PPF’s bid, adding it would call a shareholder meeting.

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.

“I don’t think PPF will accept this Sanofi bid. If you look at for how much they bought their stake, that bid still seems too low,” said Milan Vanicek, an analyst at Atlantik FT.

PPF entered Zentiva in 2005 as a portfolio investment at prices around 1,025 per share.

It has since raised the stake and changed its approach as the stock plunged from all-time high of 1,571 crowns last year, following worse-then-expected results, mainly due to poor performance in Romania. PPF, together with Italian insurer Generali (GASI.MI), owns 19.2 percent of Zentiva.

PPF is likely to raise its own bid either in an effort to gain control of the company or to prompt Sanofi to raise its bid and then sell out, Vanicek said.

Zentiva is a dominant supplier of generic, or unpatented, drugs in the Czech Republic and Slovakia. It also has subsidiaries in Romania and Turkey.

Sanofi’s move on Zentiva follows a surprise $4.6 billion agreed bid last week by Japan’s Daiichi Sankyo Co Ltd (4568.T) for top Indian generics company Ranbaxy Laboratories RANB.BO.

Big pharmaceutical groups have encountered a wave of product setbacks and political uncertainty that have sent many of their stocks to multi-year lows.

Acquiring companies that specialize in making low-cost generic drugs would allow them to diversify, target developing markets and seize on international efforts by governments to promote generics to cut healthcare expenses.

Additional reporting by Noelle Mennella in Paris, Ben Hirschler in London and the Prague bureau; Editing by Paul Bolding/Elaine Hardcastle

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