France-based drugmaker Sanofi-Aventis SA said on Monday it plans to buy US healthcare company Chattem Inc, maker of over-the-counter mainstays like Gold Bond skin products, for US$1.9 billion in cash.
The deal also gives Sanofi-Aventis a distribution base for its popular allergy drug Allegra, which is awaiting approval to switch from prescription-only to an over-the-counter version and for future switches of other drugs approaching the end of their patents.
Paris-based Sanofi-Aventis said it will offer US$93.50 per share — 44 percent more than Chattem’s average price over the past six months.
The Chattanooga, Tennessee, company makes two dozen consumer health care products, including Icy Hot pain relief medicine and Selsun Blue shampoo.
Chattem shares skyrocketed on the news, jumping US$22.96, or 33 percent, to US$92.94 in afternoon trading. In New York trading, Sanofi-Aventis shares edged up US$.015 to US$39.26.
“Chattem is the ideal entry for us in this market,” Sanofi chief executive Chris Viehbacher told reporters during a conference call.
Chattem ranks among the top 10 US consumer health companies but sells little in other countries. But it has the highest operating profit margin in the business at nearly 35 percent, far better than the 20 percent or below at what Viehbacher called “the big boys,” Procter & Gamble and Johnson & Johnson Consumer Health Care.
“Chattem is not bad. They’ve got products that are either No. 1 or a least high up in their product class,” said analyst Les Funtleyder of Miller Tabak & Co.
He said the deal is “consistent with a lot of pharma companies that are buying consumer units to diversify their revenue stream away from development of branded drugs, which is unpredictable,” Funtleyder said.
In two megadeals this fall, Pfizer Inc bought Wyeth and Merck Co acquired Schering-Plough Corp, with both buyers getting well-known consumer health products, plus veterinary medicines and other new businesses.
Sanofi-Aventis is the world’s top maker of vaccines and fifth-biggest prescription drugmaker by revenue, with blockbusters including blood thinners Plavix and Lovenox and Lantus insulin.
Sanofi said the deal would make it the world’s fifth-largest consumer health care company, up from sixth. With Chattem’s US$455 million in annual revenue, that business would have nearly US$2.5 billion in sales.
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