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Last Updated: Monday, 26 January, 2004, 13:25 GMT
Bid to create French drug giant
Sanofi HQ
France's two biggest pharmaceutical firms could merge to make a company big enough to become the third biggest firm in the drug business.

Sanofi-Synthelabo said its hostile bid for its Franco-German rival Aventis was intended to halt the speculation that would have surrounded private talks.

Aventis has scorned the approach, heralding a hard fight over Sanofi's 48bn euro offer.

A merger would create a firm just behind GlaxoSmithKline and Pfizer.

Sanofi has half the sales but about the same market valuation as its larger target.

Both companies' shares will be suspended till 1400 GMT on Monday. On Friday, with speculation reaching fever pitch, Sanofi's shares fell 6.9% while Aventis shares advanced 1.6%.

Share offer

Sanofi said it had the backing of cosmetics firm L'Oreal and oil firm Total, holders of 44% of Sanofi's shares.

Its offer, agreed by its board over the weekend, would award Aventis owners five of its shares for every six they hold in Aventis, along with 69 euros in cash.

That makes the offer 81% share-based, and offers a 3.6% premium over the price of Aventis shares at the close of trading on Friday.

"We're sure this offer is an attractive one and that we can convince the shareholders of Aventis in the coming days, weeks and months," said Jean-Francois Dehecq, Sanofi's chairman and chief executive.

White knight

But Aventis will have nothing to do with the bid, which it rejects as vastly under-valuing the company.

It is thought to be looking for a "white knight", banks or other suitors who will buy it instead.

Hostile takeovers are rare in the pharmaceuticals business, and in any case premiums tend to be nearer to 15-20%.

The French government itself, however, could already have made the white knight idea a difficult proposition for Aventis.

It has made it clear that a merger would be a good idea, creating a "national champion" in the drugs business to take on GlaxoSmithKline of the UK and the world number one, US giant Pfizer.

Another complication comes from impending legal action over drug patents facing both companies.

BBC World Service business reporter Duncan Bartlett
"Aventis shareholders will want to scrutinise Sanofi's business carefully."


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