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Zentiva bidding war opens

Sanofi-Aventis, PPF launch offers for generic drug maker

By
Staff Writer, The Prague Post
June 25th, 2008 issue

The generic drug company Zentiva has found itself in what is threatening to become a bidding war between its two largest shareholders.
The firm’s board of directors has already urged stockholders to reject the first bid, from Anthiarose Limited, a subsidiary of the PPF Group, which was announced June 17. PPF’s bid of 950 Kč ($61) per share was quickly matched the following day by an intention to place a competing bid of 1,050 Kč from the French pharmaceutical giant Sanofi-Aventis, Zentiva’s largest shareholder with a stake of nearly 25 percent.
A statement from Zentiva June 20 called PPF’s offer too low given the company’s value and outlook. Zentiva has not yet commented on Sanofi-Aventis’ offer.
An extraordinary shareholders’ meeting will take place July 9 in Amsterdam to discuss — but not vote on — PPF’s offer, and, likely, Sanofi-Aventis’ offer. PPF holds 19 percent of Zentiva. The meeting is required by Dutch law, where Zentiva’s parent company is registered.
The bids have given the company’s shares a boost and its stock has risen steadily. Last week, Zentiva’s price grew 12.5 percent and was the second most profitable on the bourse. Following Sanofi’s announcement, shares rose 6.7 percent. By June 23, Zentiva’s shares closed at 1,140 Kč.
Sanofi-Aventis said its offer has a “strong strategic rationale”, given the overlapping markets of the two companies. The bid would value Zentiva at 40 billion Kč.
Meanwhile, PPF’s bid is especially low, given analysts’ expectations for Zentiva’s performance in the future, Zentiva’s board said in a statement. The generics market is expected to take off in Europe, particularly in the East European markets where Zentiva operates.
The offer was also called “opportunistic in its timing” after Zentiva’s share prices dropped due to two “unscheduled and unprecedented” trading statements in 2007. Its net profit fell 9.5 percent in the first quarter of this year, to 470 million Kč, after costs associated with the acquisition of Turkish firm Eczacibasi were higher than expected.
Zentiva’s board also called PPF’s intentions vague and inconclusive and of no real benefit to stakeholders, employees or customers. The opinion came after internal consideration and advice from Merrill Lynch.
The generic drug market has seen a surge in interest from large pharmaceutical companies who see it as a strategy to enter emerging markets, particularly those in Eastern Europe.
Generics are growing at a faster rate than branded drugs, as insurers and governments are looking for a way to reduce spending. Zentiva’s key markets are the Czech Republic, Turkey, Romania, Slovakia, Poland and Russia.

can be reached at business@praguepost.com


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