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An offer from US private equity firm Clayton, Dubilier & Rice has beaten rivals pursuing French pharmaceutical company Sanofi’s consumer healthcare division, in what is set to be the largest European healthcare deal this year.
The US group on Thursday edged out a submission from a consortium led by French private equity firm PAI as it nears a deal with the French seller. Negotiations between Sanofi and CD&R would now continue, the pharmaceutical group confirmed on Friday. A deal could be reached within days, but is not yet finalised.
CD&R’s offer values the business, which makes over-the-counter pain management and allergy medications, such as Doliprane and Allegra, at €15.5bn. Sanofi would keep a stake of about 50 per cent in the business, with a view to selling it in the next few years, according to people with knowledge of the offer.
A transaction would be the latest of several sales of consumer divisions by pharmaceutical companies, as large groups in the sector seek to dispose of steady but low-earning businesses to focus their resources on the riskier but more lucrative field of drug development.
The mooted sale to a US fund has attracted criticism from some politicians and unions in France concerned about sovereign control of key medicine supplies. During the pandemic, the reshoring of medical supply chains became a political issue because of shortages of drugs such as the painkiller paracetamol. Sanofi markets paracetamol under the name Doliprane.
France’s finance and industry ministers said in a statement on Friday that they viewed CD&R as a “serious investor” but reminded the parties of the state’s requirements. Those are the maintenance of national supplies of essential medicines and that the business’s headquarters and production sites remain in France. “The health security of the French people is the government’s priority,” they said.
Sanofi has been exploring options for a sale or a potential float since it announced plans to separate the division a year ago. The Opella consumer division accounts for a tenth of the group’s total sales.
Chief executive Paul Hudson told the Financial Times last year that a future as a publicly listed entity was “the most likely path” for the division, but Sanofi seems to now be moving towards a private equity-led takeover.
In 2021, GSK and Pfizer listed their joint-venture consumer healthcare business, Haleon, in London, while Johnson & Johnson of the US separated off its consumer company Kenvue in 2022.
In keeping a large stake in Opella, Sanofi would seek to benefit from the reliable earnings it offers. GSK and Pfizer also both maintained large stakes in Haleon on listing, which they have since sold down.
Hudson will now focus on improving the company’s research and development output. The executive took investors by surprise last October when he decided to scrap Sanofi’s margin target for 2025 and unveiled plans to spend an additional €2bn on research in 2024 and 2025, leading to a 19 per cent hit to the company’s share price.
Sanofi is heavily reliant on income from its blockbuster asthma and allergy treatment Dupixent; developed by US drugmaker Regeneron. The drug accounted for almost a quarter of sales in 2023, but will lose patent protection around 2031.
Hudson has outlined 12 potential blockbuster candidates to shareholders in a bid to convince them that he can deliver on the company’s R&D ambitions.
Reporting by Ian Johnston, Adrienne Klasa, Ivan Levingston, Oliver Barnes and Alexandra Heal