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30 Jun 2016

Sanofi, Boehringer Ingelheim’s asset swap : Why and How?

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Sanofi and Boehringer Ingelheim have agreed to a $25.1 billion asset swap, in which Sanofi will trade its Merial animal-health business for Boehringer’s consumer-health operation.
What is asset swap?
French-headquartered Sanofi will exchange its animal health segment for the consumer healthcare business of Germany’s Boehringer Ingelheim. The move will boost both companies’ size and scale in key strategic areas.

Before Asset Swap

Sanofi

Animal Health Segment / Merial

Boehringer Ingelheim

consumer healthcare business
After Asset Swap

Sanofi

consumer healthcare business

Boehringer Ingelheim

Animal Health Segment / Merial

Financials of the deal
The transaction values Sanofi’s animal health arm (Merial) at €6.7 billion, and Boehringer’s consumer health business at €11.4 billion. Boehringer will pay Sanofi €4.7 billion in cash to make up the difference. The deal adds to the rising tide of dealmaking in the pharma sector and is the second largest asset swap after the 2014 exchange between GSK and Novartis.
Sanofi sees consumer health care as a market offering modest but reliable growth. The firm identified Boehringer as having complementary brands in four priority areas – vitamins, minerals and supplements; cough and cold care; digestive health; and pain care. Sanofi already holds a top-5 position in digestive health, pain care and allergy. The exchange will help it compete with the likes of Bayer, GSK and Johnson & Johnson.
For Boehringer, the swap more than doubles its sales in animal health care, to around €3.8 billion based on 2015 figures. Merial’s focus on pets, farm animals and veterinary public health will improve Boehringer’s position in the market by combining platforms in anti-parasitic, vaccines and pharmaceutical specialities.
Boehringer wanted to ‘gain critical mass within animal health, which is much less fragmented [than consumer healthcare],’ says Conover. ‘You have just a few players holding the majority of the business there and scale is even more important. With the Sanofi assets, it is going to be one of the top players.’

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