Sanofi and Boehringer Ingelheim have entered into exclusive negotiations to swap businesses. The proposed transaction would consist of an exchange of Sanofi animal health business (Merial) with an enterprise value of €11.4 billion and Boehringer Ingelheim consumer healthcare (CHC) business with an enterprise value of €6.7 billion. Boehringer Ingelheim CHC business in China would be excluded from the transaction. The transaction would also include a gross cash payment from Boehringer Ingelheim to Sanofi of €4.7 billion.
The transaction would allow Sanofi to become the number one ranked player in CHC with expected pro forma sales of approximately €5.1 billion in 2015 and a global market share close to 4.6 per cent. Sales of Boehringer Ingelheim CHC business (excluding China) are estimated at about €1.6 billion for 2015 and are highly complementary with those of Sanofi CHC, both in terms of products and geographies. Boehringer Ingelheim CHC would improve the position of Sanofi in Germany and Japan where Sanofi CHC presence is limited, and expand Sanofi presence in its priority categories. Sanofi would gain access to iconic brands in antispasmodics, gastrointestinal, VMS and analgesics, and attain critical mass in cough and cold. Sanofi CHC business in the US, Europe, Latin America and Eurasia would also expand significantly, giving it multiple leadership postions in key countries and/or on key product categories.
The animal health industry is a very attractive industry in terms of innovation, growth potential and profitability. Combining Merial's and Boehringer Ingelheim's complementary strengths would create the second largest player in the global animal health market with pro forma sales of approximately €3.8 billion in 2015 with the ability to compete for global market leadership. The combined portfolios and technology platforms in anti-parasitics, vaccines and pharmaceutical specialities would place the combined company in the key growth segments of the industry. The species portfolios are highly complementary building on Merial's expertise in companion animals and poultry and BI's expertise in swine.
"In entering into exclusive negotiations with Boehringer Ingelheim, we have acted swiftly to meet one of the key strategic objectives of our roadmap 2020, namely to build competitive positions in areas where we can achieve leadership. This transaction would allow Sanofi to become a world leader in the attractive non-prescription medicines market and would bring a complementary portfolio with highly recognized brands, allowing for mid and long term value creation," said Olivier Brandicourt, M.D., chief executive officer, Sanofi. "I am confident that Boehringer Ingelheim will enable Merial to fully express and develop its potential in the attractive but competitive animal health market."
Germany would become a key centre of Sanofi CHC business, including in particular for gastro-intestinal and cough and cold categories that will benefit from the strong capabilities of Boehringer Ingelheim teams. Sanofi will pay particular attention to social matters as well as skills and people retention sensitivities.
"Boehringer Ingelheim's strategic priority is to focus on the company's core areas of expertise and businesses with an established global scale, or where a pathway to a global scale can be achieved and prioritized among Boehringer Ingelheim's portfolio opportunities," said Prof. Dr Andreas Barner, chairman of the Board, Boehringer Ingelheim.
"Boehringer Ingelheim Animal Health is and will stay strongly committed to bringing novel, innovation driven solutions to veterinarians and animal owners. Our combined Animal Health business would be well positioned for growth and emergence as a leader globally. I am confident that Sanofi will enable our CHC business to fully live its potential supported by highly professional and committed teams."
Lyon would be a key operational center of Boehringer Ingelheim's animal health business. Boehringer Ingelheim will commit to maintain business operations, R&D and manufacturing centres in France. As the US market is an important part of Merial's business, Boehringer Ingelheim would pay particular attention to sustain the momentum of the US operations. Boehringer Ingelheim will give particular attention to social matters as well as skills and retention sensitivities.
The execution of definitive agreements is expected in the coming months following consultations with the relevant social bodies. Boehringer Ingelheim and Sanofi's goal currently is to close the potential transaction in Q4 2016, subject to appropriate regulatory approvals.
Sanofi intends to use a portion of the net proceeds of the transaction to repurchase shares. Taking into account the anticipated CHC results, share buybacks and potential synergies, the overall transaction is expected to be business EPS neutral in 2017 and accretive in subsequent years.
Boehringer Ingelheim consumer healthcare is the 8th largest consumer healthcare business in the world. Sales of Boehringer Ingelheim's CHC business were €1.4 billion in 2014, contributing 11 per cent to Boehringer Ingelheim's net sales. It aims to create and drive inspiring and sustainable solutions that will efficiently develop compelling and true global brands for consumers.The leading brands of Boehringer Ingelheim's CHC business are the antispasmodic Buscopan (2014 sales of €219 million; mainly sold in Europe and Latin America), the laxative Dulcolax (2014 sales of €204 million; sold in more than 40 countries with a strong presence in the US), the multivitamins Pharmaton (2014 sales of €133 million, with majority of sales in Latin America), the cough treatments Mucosolvan (2014 sales of €165 million, mainly in China, Germany and Russia) and Bisolvon (2014 sales of €101 million with a fragmented worldwide presence with largest countries being Spain and Italy) and the cold treatment Mucoangin/Lysopaine (2014 sales of €48 million).
Sales of Sanofi CHC business were €3.3 billion in 2014. The leading brands of Sanofi's CHC business are the allergy products Allegra (2014 sales of €350 million) and Nasacort (2014 sales of €114 million), the pain killers Doliprane (2014 sales of €310 million), No-Spa (2014 sales of €109 million) and Dorflex (2014 sales of €90 million), the digestive products Essentiale (2014 sales of €235 million), Enterogermina (2014 sales of €156 million) and Maalox (2014 sales of €98 million), the feminine care product Lactacyd (2014 sales of €104 million) and the vitamins, minerals and supplements Magné B6 (2014 sales of €88 million). In 2014, 52.6 per cent of CHC sales were generated in emerging markets, 21.2 per cent in the US and 20.3 per cent in Western Europe.