Boehringer Ingelheim, Sanofi Agree to $25 billion Business Unit Swap

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--France's drug giant, Sanofi (NASDAQ:SNY) (Paris, France), and Germany's privately held Boehringer Ingelheim (BI) (Ingelheim, Germany) have engineered a $25 billion agreement to trade Sanofi's Merial animal drugs business with Boehringer's Consumer Health Care (CHC) over-the-counter (OTC) group. First discussed in late 2015, the deal should close by the end of the year.

Click icon at right for a graph showing plants and employment totals by country for Sanofi and Boehringer Ingelheim

Sanofi's Merial has an enterprise value (EV), or total value, of $12.6 billion, while Boehringer Ingelheims' CHC business carries a $7.4 billion EV. To offset the difference in valuation, Boehringer Ingelheim will make a cash payment of $5.2 billion to Sanofi. Boehringer's China business is not included in the deal.

Boehringer Ingelheim's stance is that the swap, even with the additional cash being paid, is a wise move with an eye toward strengthening the company's position in the Animal Health sector. "As a research based pharmaceutical company, we will substantially enhance our position in the future markets for Animal Health and will prospectively be one of the largest global players in this segment," said Andreas Barner, chair of the board of Boehringer Ingelheim, in a statement.

For Boehringer, it will double its sales in the animal health sector to about $4.2 billion, boosting the company to the world's second largest animal care provider. Many of the brands that Boehringer Ingelheim will be acquiring with Merial serve the fast-growing companion animal market, including Frontline and Heartgard. The medical brands for farm animals include Vaxxitek, Eprinex, Ivomec, Longrange, Circovac and GastroGard.

Sanofi will come away from the deal with a boost of its consumer health market share to 4.6%. The transaction will allow the company to diversify and help avoid dependence on patent protected drugs.

The swap will bolster Sanofi's CHC presence in Germany, which will have a heavy focus on the gastrointestinal and cold-and-cough categories. The company will be picking up Boehringer's Dulcolax and Mucosolvan product lines.

Along with the business and products, the companies will also acquire the respective manufacturing and research facilities.

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