Sanofi, BI Progress Multi-Billion Business Swap
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Sanofi and Boehringer Ingelheim have signed contracts to secure the strategic transaction initiated in December 2015 that consists of an exchange of Sanofi's animal health business (Merial) and Boehringer Ingelheim's consumer healthcare (CHC) business. This step marks a milestone before closing of the transaction, which is expected by year-end 2016 and remains subject to approval by all regulatory authorities in different territories.

The integration of Boehringer Ingelheim's CHC business into Sanofi and Merial into Boehringer Ingelheim would start after closing.

The strategic swap lays the foundation for both companies to reach size and scale in two pharmaceutical activities, respectively consumer healthcare for Sanofi, and animal health for Boehringer Ingelheim. Upon successful completion, Boehringer Ingelheim's CHC business, with an enterprise value of EUR 6.7 billion ($7.4 billion), would be transferred to Sanofi and Sanofi's Merial, with an enterprise value of EUR 11.4 billion ($12.6 billion), would be transferred to Boehringer Ingelheim. The transaction includes a cash payment to Sanofi of EUR 4.7 billion ($5.2 billion) to reflect the difference in value of the two businesses. Taking into account the expected contribution from the acquired CHC business, progressive implementation of synergies and the use of part of the net proceeds to buy shares back, Sanofi expects the overall transaction to be business earnings-per-share neutral in 2017 and accretive afterwards.

Combining Merial and Boehringer Ingelheim's current animal-health portfolio would more than double Boehringer Ingelheim’s animal health business to approximately EUR 3.8 billion ($4.2 billion) based upon 2015 global sales.

With this transaction, Sanofi would integrate Boehringer Ingelheim's CHC business in all countries except China. Joint CHC sales (excluding Venezuela) would amount to approximately EUR 4.9 billion ($5.4 billion) based upon 2015 global sales. Sanofi would enhance its position in several of its strategic categories: pain care, allergy solutions, cough & cold care, feminine care, digestive health, and vitamins, minerals, and supplements.

The signing of the contracts was preceded by six months negotiations that went according to plan, said the companies in a joint statement. Both companies have reviewed and discussed the details of the transaction. This included the exact scope of the business swap as well as ensuring compliance with regulatory requirements. In the past months, Boehringer Ingelheim and Sanofi also said that they closely consulted with the relevant social bodies in France and Germany as well as with the appropriate regulatory authorities to lay the groundwork for the realization of the business swap.

In accordance with their commitment at the beginning of the negotiations, the companies agreed that Lyon (France) and Toulouse (France) would be key operational centers of Boehringer Ingelheim's animal health business, including business operations, R&D and manufacturing facilities in Lyon and the production site in Toulouse.

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 companies in their statement. Germany would be a key center of Sanofi's CHC business, including in particular gastrointestinal and cough & cold categories that will benefit from the capabilities of current Boehringer Ingelheim teams, according to Sanofi.

Source: Sanofi and Boehringer Ingelheim

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