Sanofi to buy US rival with $1.9bn offer

City A.M. Reporter
SANOFI-Aventis will buy US consumer healthcare firm Chattem for around $1.9bn (£1.2bn), in a deal which will give the French drugmaker over-the-counter presence in the US market.

Sanofi said it would start a tender offer for all of Chattem’s shares at $93.50 per share, a premium of 34 per cent over Friday’s closing price.

The deal fits with Sanofi chief executive Chris Viehbacher’s plan to broaden the firm away from prescription drugs, aiming to offset looming sales losses of older drugs due to generic competition and to new branded rivals. He said the total US over-the-counter market was worth $20bn.

The French group has targeted partnership deals to find new drugs and takeovers of up to €15bn (£13.3bn) rather than pursuing mega-mergers -- a tactic preferred by rivals like Pfizer and Merck.

“It looks for me an interesting deal to generate a lot of synergies,” said Timo Kuerschner, analyst at LBBW. “It’s a special Sanofi-Aventis theme, because they have the greatest need to move something. Either they go into generic business or they have to do a deal like this one, and this one for me makes more sense and is better.” Kuerschner added that the premium of 34 per cent “looks reasonable”.

Sanofi chief financial officer Jerome Contamine said the deal was at a basis of an enterprise value at 13.3 times 2009 earnings before interest, tax, depreciation and amortisation, which he called in line with recent deals.

Chattem makes and sells household and personal care products such as over-the-counter drugs, cosmetics and dietary supplements. It was founded more than 100 years ago and its brands include Gold Bond, Icy Hot, Cortizone-10 and Unisom. The transaction had been backed by Chattem’s directors and was expected to be accretive to Sanofi’s earnings from year one.