Seeking Aventis

In response to a second request from the French stock market authority, AMF, that it clarify its position regarding a possible bid to acquire Aventis, Novartis last week confirmed that it has completed a feasibility study that finds a viable business case for combining the two drug firms.

Novartis, which emerged earlier this month as a possible white knight in the standoff over Sanofi-Synthélabo's nearly $60 billion hostile overture for Aventis, also said its plan would likely include the formation of two drug firms. One would include mature and noncore products from Novartis and Aventis. The other would be formed by combining research operations and top-selling drugs from both firms. Novartis CEO Daniel Vasella says the strategy would help preserve jobs.

Sanofi executives last week criticized Novartis' scheme as having the effect of "dismantling" Aventis. Sanofi CEO Jean-François Dehecq has commented, however, that he sees about $2 billion in cost reduction potential by optimizing sales and research operations in a combination of Aventis and Sanofi.

French Prime Minister Jean-Pierre Raffarin has also criticized Novartis' interest in Aventis, asserting two weeks ago that an acquisition of the Franco-German Aventis by Swiss-based Novartis would threaten France's guaranteed access to French-made vaccines that he says are required to combat bioterrorism.

Industry sources called Raffarin's comment inappropriate in that Aventis and Sanofi are publically held companies. In its response to AMF last week, however, Novartis stated that it would not enter negotiations unless the French government backs off its support for Sanofi.

Industry watchers say that while Novartis would likely win in a bidding war against Sanofi, it would not easily prevail against a rival that has the support of France.