(Adds analysts, valuations, background)
By Sudip Kar-Gupta
PARIS, June 18 (Reuters) - French drugmaker Sanofi-Aventis
<SASY.PA> plans to make a 40.04 billion crown ($2.57 billion)
offer for Czech drugmaker Zentiva <>, trumping a bid
from financial group PPF.
The move would take Sanofi deeper into the field of generic
drug production, an area which has traditionally been shunned by
large pharmaceutical companies but is now receiving increased
interest as a way to tap booming emerging markets.
Sanofi -- already a key shareholder in Zentiva -- said on
Wednesday that it was planning to offer 1,050 Czech crowns for
each Zentiva share.
That pitted Sanofi against Czech financial group PPF, which
formally launched a 950 crown per share offer on Tuesday.
Zentiva shares rose seven percent to 1,114 crowns at 0920
GMT, above both bids and the highest level since October 2007.
It was the biggest gainer among large caps in central Europe.
Sanofi traded 1.4 percent up at 42.64 euros.
Sanofi's offer represents a premium of around 10.5 percent
to PPF's bid and the French company, which is the world's
third-largest drugmaker by sales, said buying Zentiva made
strategic sense.
"Sanofi-Aventis is already established in the various
markets where Zentiva operates. The intended acquisition of the
control of Zentiva carries a strong strategic rationale," Sanofi
said in a statement.
The Sanofi bid valued the company at 23.2 times forecast
2008 price/earnings, according to broker Patria Finance, above
the central and eastern Europe drug sector average of 20.3.
Patria advised investors to sell, but some other analysts
said PPF may try to drive the price up.
"I don't think PPF will accept this Sanofi bid. If you look
at for how much they bought their stake, that bid still seems
too low," said Milan Vanicek, an analyst at Atlantik FT.
PPF entered Zentiva in 2005 as a portfolio investment at
prices around 1,025 per share. It has since raised the stake and
changed its approach as the stock plunged from all-time high of
1,571 crowns last year, following worse-then-expected results,
mainly due to poor performance in Romania.
PPF is likely to raise its own bid either in an effort to
gain control of the company or to prompt Sanofi to raise its bid
and then sell out, Vanicek said.
Zentiva is a dominant supplier of generic, or unpatented,
drugs in the Czech Republic and Slovakia. It also has
subsidiaries in Romania and Turkey.
Zentiva said it had no immediate comment on Sanofi's planned
counterbid and would issue a statement later on Wednesday. On
Tuesday, Zentiva told shareholders to take no action for now on
PPF's bid, adding it would call a shareholder meeting.
GENERIC DRUGMAKERS IN VOGUE
Sanofi owns 24.9 percent of Zentiva. PPF, together with
Italian insurer Generali <GASI.MI>, owns 19.2 percent.
PPF, controlled by the Czech Republic's richest businessman,
Petr Kellner, said it would proceed in line with the terms of
its own offer. The offer allows for a possible rise in the bid,
but also for a withdrawal of the offer in case of a counterbid.
Sanofi's move on Zentiva follows a surprise $4.6 billion
agreed bid last week by Japan's Daiichi Sankyo Co Ltd <4568.T>
for top Indian generics company Ranbaxy Laboratories <RANB.BO>.
Big pharmaceutical groups have encountered a wave of
product setbacks and political uncertainty that have sent many
of their stocks to multi-year lows.
Acquiring companies that specialise in making low-cost
generic drugs would allow them to diversify, target developing
markets and seize on international efforts by governments to
promote generics to cut healthcare expenses.
(Additional reporting by Ben Hirschler in London and the Prague
bureau; Editing by Quentin Bryar, Paul Bolding)
