(Updates with PPF comment, analyst comment, background)
By Jana Mlcochova
PRAGUE, June 20 (Reuters) - Czech generic drugs maker
Zentiva <> advised shareholders to reject a buyout bid
by financial group PPF but did not comment on
a higher counter offer from Sanofi-Aventis <SASY.PA>.
The French patent drugs maker, already a major shareholder
in Zentiva with a 24.9 percent stake, plans to offer $2.6
billion, or 1,050 Czech crowns per share, trumping PPF's 950
crowns per share offer.
"We strongly believe that the (PPF) offer price fails to
reflect the underlying value of Zentiva and its future
prospects," Zentiva Chairman Jiri Michal said in a statement on
Friday.
Zentiva management holds a 6 percent stake in the company
with factories in the Czech Republic, Slovakia, Romania and
Turkey.
PPF declined to comment.
Analysts said the recommendation to reject the lower PPF bid
came as no surprise.
"From their (Zentiva) point of view it is somewhat logical
that they reject the lower of the two competing bids. I would
rather wait to see how they comment on... Sanofi's competing
bid," said Bram Buring, an analyst at Wood & Co.
Analysts have said the Sanofi bid may prompt PPF to raise
its offer, hoping Sanofi would go even higher, and then PPF
would sell out.
For Sanofi, the acquisition of a controlling stake in
Zentiva would be a strategic move into the region and deeper
into unpatented drugs. Generic drug production has traditionally
been shunned by large pharmaceutical companies but is now
receiving increasing interest as a way to tap booming emerging
markets.
The Sanofi bid values Zentiva at 23.2 times forecast 2008
earnings, above the central and eastern Europe drug sector
average of 20.3, according to brokers Patria Finance.
Zentiva reiterated it expected revenues to rise around 20
percent this year and to achieve operating profit (EBIT) margin
of above 15 percent.
The company called an extraordinary shareholders meeting for
July 9 to discuss the offer by PPF, which holds a 19.2 percent
stake, but had no comment on the Sanofi bid.
"The board also noted the recent announcement by
Sanofi-Aventis of its intention to make a competing offer to
acquire Zentiva shares," the company said, but did not
elaborate.
At 1012 GMT Zentiva shares were 0.26 percent up at 1,152
crowns, while the Prague PX <> rose 0.55 percent.
Zentiva stock has dropped from all-time highs of 1,571 in
April last year, following worse-than-expected results mainly
due to poor performance in Romania.
(Additional reporting by Jan Korselt; editing by Sue Thomas and
Tony Austin)
