Sanofi-Synthelabo of France announced the forthcoming birth of the world's third-largest pharmaceuticals group with a better bid for its French-German rival Aventis, in line with French wishes but to the dismay of German unions.
French Prime Minister Jean-Pierre Raffarin said France had made "a strategic decision" in favour of the health sector, as it had decades ago in the aeronautical industry and nuclear energy.
Anticipating charges that Sanofi increased its offer by 14-per cent to 54.5 billion euros (64.31 billion dollars) under government pressure, Raffarin said "France is not interventionist for its own sake, but wants to take part in a European dynamic".
In Brussels, the European Commission regulators gave a green light to the deal after having received assurance from Sanofi that measures would be taken to protect competition by selling off products where that could be an issue.
Until Friday, when the French government stepped up pressure on Sanofi and Aventis to merge, the latter had been leaning in favour of a merger with Swiss giant Novartis.
In Berlin, the government urged Sanofi to safeguard jobs and research activities at Frankfurt, where most of the 9,000 Germans employed by Aventis work. Spokesman Bela Anda said the government would watch the takeover very closely but remain neutral in the process.
But union leaders in Frankfurt expressed concern at what they said was a threat to German jobs and at the government's failure to act to prevent the takeover.
"The atmosphere is very bad, a mix of anger, sadness and disappointment," said Gertraud Lauber, a representative of the union IG BCE at the Aventis site.
"We won guarantees about jobs in 1998 when Hoechst and Rhone-Poulenc merged (to form Aventis), and these guarantees are going to disappear," he said.
Sanofi's chairman Jean-Francois Dehecq, who would head the new group known as Sanofi-Aventis, sought to allay German fears, saying the takeover would "create wealth for shareholders but is also in the interest of employees."
He told a news conference that "Sanofi is a smaller firm than Aventis, and since we are growing quickly we need to find new resources."
Aventis chairman Igor Landau -- who had fought Sanofi's initial hostile 47.8-billion-euro bid and encouraged Novartis -- told the same news conference that he was "happy" to have reached an agreement which "recognises the value of Aventis".
Sanofi shares plunged by 6.97 per cent to 52.05 euros and Aventis shares by 5.51 per cent to 62.60 euros.