Monthly M&A Insider - Mergermarket

Benelux
Solvay: possible divestment of
pharma division
• Solvay, the Belgium-listed pharmaceutical and chemicals
business, could attract a bidding war by pursuing a break
up of its pharmaceutical division. An auction will most
likely take place rather soon. Numerous European entities
have expressed interest in different parts of the group’s
pharmaceutical business in the past and this could now
be revived. Although several sources believed a full
division sale was more likely, they agreed only a few
entities would bid due to the unit’s unfocused business
nature and size.
• Early April, Solvay confirmed it was in talks with
third parties and considering various options for its
pharmaceutical division. Solvac, the family-owned 30%
shareholder in Solvay, has denied a report suggesting it
had any contact with third parties about the sale of any
of its stake in Solvay. The statement followed a report
claiming Solvac had last month rejected a €7.2bn (€85 per
share) bid from French drug giant Sanofi-Aventis. Solvac
would be holding out for a €100 per share bid.
• The division pharma, valued at around €5bn, includes a
cardiometabolics and neuroscience franchise – the two
which are considered by the company to be core – along
with flu vaccines, pancreatic enzymes, gastroenterology
and hormone treatments. Solvay may however want
to hold on to its core franchises as they are the most
profitable, and sell off the non-core parts of the business.
Bayer Schering could be a potential contender for the
hormone treatments. Solvay is partnering with Russian
company Petrovax on flu vaccines, while other companies
in this niche space are Baxter, Novartis’ Chiron, GSK
Biologicals, Sanofi Pasteur and Intercell. However,
sources familiar with the sector said a full sale of the
division was the expected result of Solvay’s pharma
division review. They said a sale of Solvay’s pharma
division would continue the recent trend in the sector of
buyers looking for access to emerging markets. Sanofi is
looking for deals such as this in the Solvay price range, as
is GSK which was identified as another potential bidder.
• A more limited deal could be struck with a bidder
for access to Solvay’s generics portfolio in emerging
markets, following the recent GSK purchase of part of
UCB’s portfolio and Sanofi-Aventis’ acquisition of Zentiva,
as examples of deals with the same strategic rationale.
Benelux
Solvay is one of the last European businesses with a
combined chemical/pharma model and, as per a UK based
analyst familiar with the sector, may feel the current
round of pharma industry consolidation is its last chance
to offload the pharma division and pocket the cash or
reinvest in its remaining business, which are facing
tough times.
• The need to replenish the pipeline and grow the number
of patents could be the driver behind Sanofi’s reported
approach to Solvay Pharmaceuticals. Other interested
bidders for the division as a whole could be Takeda
and AstraZeneca. Players said not to be in the running
included Pfizer and Merck, which are both involved in
large-scale M&A and would have no reason to divert
resources to smaller-scale activity in Europe. Mid-market
sector players such as Abbott Laboratories - a partner to
Solvay – would be unlikely to bid for the pharma division
either. Mid-market players stand to gain little from
acquiring the division. Solvay Pharmaceuticals is too small
a player to convert an acquirer into a major company. At
the same time, the business, while offering an interesting
pipeline, is too generalist to offer the niche dominance
required by mid- or small-cap pharma company.
Dutch TMT sector on the look-out: Ortec
• Ortec, the privately owned Dutch time and resources
planning solutions provider, could be consider bolt-on
acquisitions this year. Opportunities among distressed
competitors may arise in the wake of the current
financial crisis and Ortec could seize the opportunities
to take over ailing competitors if they fit with its
organisation and if the price is reasonable. Potential
acquisitions would be aimed at getting new clients,
strengthening the company’s core business activities and
expanding in a new location. The company has grown
both internally and externally in the past. However, it will
focus on organic growth this year, following its clients’
expansion abroad, and opening new subsidiaries near its
plants. Ortec is expected to increase its turnover by 20%
through organic growth in 2009.
• Eventual buys would be financed internally through
existing cash flow as Ortec is currently “very profitable”
and “very well-financed” by its private shareholders.
Stakeholders include the three founders, some key
managers and a financial entity with no voting rights
encompassing other employees. No change would affect
Monthly M&A report – 145