Sanofi and Boehringer Ingelheim have entered into exclusive negotiations to swap businesses. The proposed transaction would consist of an exchange of Sanofi’s animal health business (Merial) with an enterprise value of EUR 11.4 billion ($12.4 billion) and Boehringer Ingelheim’s consumer healthcare (CHC) business with an enterprise value of EUR 6.7 billion ($7.3 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 EUR 4.7 billion ($5.1 billion).

The transaction would allow Sanofi to become a top ranked player in CHC with expected pro forma sales of approximately EUR 5.1 billion ($5.6 billion) in 2015 and a global market share close to 4.6%. Sales of Boehringer Ingelheim CHC business (excluding China) are estimated at about EUR 1.6 billion ($1.7 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 would expand Sanofi’s presence in its priority categories. Sanofi would gain access to brands in antispasmodics, gastrointestinal, vitamins, minerals and supplements, and analgesics, and attain critical mass in cough and cold remedies. Sanofi CHC business in the US, Europe, Latin America, and Eurasia would also expand and give it multiple leadership positions in key countries and/or on key product categories. Germany would become a key center of Sanofi CHC business, including in particular for gastro-intestinal and cough & cold categories.

Combining Merial's and Boehringer Ingelheim's animal health business would create the second largest player in the global animal health market with pro forma sales of approximately EUR 3.8 billion ($4.2 billion) in 2015, according to estimates from the companies with portfolios and technology platforms in anti-parasitics, vaccines, and pharmaceutical specialties. The species portfolios are complementary building on Merial's expertise in companion animals and poultry and Boehringer Ingelheim’s expertise in swine. 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 centers 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, said the company.

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 the fourth quarter of 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 earnings-per-share neutral in 2017 and accretive in subsequent years.

Source: Boehringer Ingelheim and Sanofi