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[DewDiligence]

Zentiva Accepts Sweetened $2.6B Buyout by Sanofi

http://www.reuters.com/article/marketsNews/idINLM50530920080922

›Mon Sep 22, 2008 4:13am EDT
By Sudip Kar-Gupta and Jana Mlcochova

PARIS/PRAGUE, Sept 22 (Reuters) - Czech generic drugmaker Zentiva (ZNTVsp.PR) accepted a higher takeover offer from France's Sanofi-Aventis (SASY.PA) that values Zentiva at around 1.8 billion euros ($2.6 billion), the companies said on Monday.

The acquisition takes Sanofi deeper into the field of generic or unpatented medicines -- an area previously shunned by large pharmaceutical companies but which is now receiving increased attention as a way to tap booming emerging markets.

Sanofi said it raised its offer to 1,150 Czech crowns per share, a premium of around 6 percent to Zentiva's closing share price of 1,085 crowns on Friday. Zentiva rejected an earlier 1,050 crown per share bid by Sanofi, saying it failed to reflect the company's future growth potential.

"We believe that the improved offer represents attractive value for Zentiva's shareholders, particularly in light of the current market turbulence," Zentiva's chief executive Jiri Michal said in a statement.

Shares in Zentiva rose in early trade to 1,142 crowns, 5.3 percent higher, while Sanofi stock fell 1.4 percent.

Michal also said he would tender his 3.4 percent stake in the group, along with other company managers holding 2.3 percent. As part of the deal, Michal will stay on as Zentiva's CEO.

Zentiva had been at the centre of competing takeover bids since May, when the drugmaker's second largest shareholder, Czech financial group PPF, said it would bid 950 crowns per share. The move prompted Sanofi, the largest shareholder with a 24.9 percent stake, to launch its own 1,050 crown a share bid in July.

Zentiva said the latest bid represents a 25.5 percent premium over its closing price of 916.6 crowns on April 30, the last trading day before PPF announced its bid intention.

The bid is conditional on gaining more than 50 percent of control over Zentiva, along with competition clearance. Sanofi has already won approval in Russia and Ukraine, and is awaiting clearance from the European Union and Turkey.

Zentiva, which produces generic copies of branded drugs, operates in central and eastern Europe, with the Czech Republic, Romania and Turkey among its largest markets.

Zentiva had said it was seeking a partner to boost its presence in target markets and that in the next two to three years it could be taken over by a bigger peer.

Its shares have added 11.6 percent from the beginning of the year, outperforming Prague's main PX index, which dropped 27.5 percent. The company trades at 21.8 times this year's forecast earnings, versus a European sector average of 22.9, according to Reuters data.

Sanofi trades at just 9 times this year's forecast earnings. Its shares closed at 47.56 euros on Friday, giving the company a market capitalisation of around 62.5 billion euros. Sanofi shares have fallen around 24 percent since the start of the year.‹