Sanofi SNY announced that it has signed contracts with Boehringer Ingelheim for the strategic transaction initiated in Dec 2015 regarding an exchange of their respective businesses.
The business swap comprises an exchange of Sanofi’s animal health business (Merial) with an enterprise value of €11.4 billion for Boehringer Ingelheim’s consumer healthcare (CHC) business worth €6.7 billion. However, the deal does not cover Boehringer Ingelheim’s CHC business in China.
The transaction is expected to close by the year end.
Benefits for Sanofi
The addition of Boehringer Ingelheim’s CHC business is expected to strengthen Sanofi’s position in several of its categories like Pain Care, Allergy Solutions, Cough & Cold Care, Feminine Care, Digestive Health and Vitamins, and Minerals and Supplements.
In addition, Boehringer Ingelheim will make a cash payment of €4.7 billion to Sanofi, which is the difference in value of the two businesses. Sales from the CHC business, excluding sales in Venezuela, should amount to approximately €4.9 billion, based on 2015 worldwide sales.
Considering projected CHC results, share buybacks and potential synergies, Sanofi expects the deal to be neutral to its earnings in 2017 and accretive in subsequent years.
Notably, Germany will become a key center for Sanofi’s CHC business, particularly for the Gastro-Intestinal and Cough & Cold categories. These categories are expected to benefit from the strong capabilities of Boehringer Ingelheim’s teams.
Benefits for Boehringer Ingelheim
Boehringer Ingelheim’s animal health business will see its sales more than double to approximately €3.8 billion, based on 2015 worldwide sales.
The combined portfolios and technology platforms in anti-parasitics, vaccines and pharmaceutical specialties will enable the company to enter key growth markets, thereby bringing more value and innovation to customers across the world.
While Lyon and Toulouse would be key operational centers for Boehringer Ingelheim's animal health business, the company will maintain operations, and R&D and manufacturing facilities in Lyon and the production site in Toulouse.
Considering importance of the U.S. market for Merial's business, Boehringer Ingelheim intends to focus on maintaining the momentum of its operations in the country.
Upon the necessary regulatory clearances, both the companies will become global leaders in two different sectors of the pharmaceutical market.
Sanofi currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are ANI Pharmaceuticals, Inc. ANIP, Retrophin, Inc. RTRX and Pfizer Inc. PFE, each sporting a Zacks Rank #1 (Strong Buy).
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