France Weighs State Stake in Sanofi Unit Being Sold to CD&R

Ania Nussbaum and William Horobin
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(Bloomberg) -- The French government is looking at options including taking a public stake in the consumer health business that Sanofi is in talks to sell to US buyout firm Clayton Dubilier & Rice to protect jobs and production in France.

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CD&R is nearing the purchase of a 50% controlling stake in the unit after seeing off French rival PAI Partners in a deal that people familiar with the matter have said would value it at about €15 billion ($16.4 billion). The division sells over-the-counter medications, including pain reliever Doliprane, which is the most-used drug in France.

“The commitments we will demand will not only be very precise, but they will include guarantees, sanctions, and the means to take stakes,” Finance Minister Antoine Armand said on Monday during a visit to a Sanofi plant in Lisieux, France. The measures “will allow us to ensure the right strategy in terms of health and industrial sovereignty for the country.”

The government wants the unit, called Opella, to keep its headquarters, investment and research in France, Finance Ministry officials told reporters in a briefing on Monday. It also wants to prevent a job-cut plan and to ensure Sanofi sticks to a commitment to reshore its paracetamol supply chain to France.

The ministry will also launch an investment screening procedure and may ask state-owned investment bank BPIfrance to take a stake, or consider a golden share, the officials added.

Sanofi shares were 1% higher at 12:36 p.m. Paris time, bringing the gain this year to 13%.

Sanofi Chief Executive Officer Paul Hudson announced plans to split off the division a year ago to concentrate on developing innovative medicines with the aim of turning the company into a pure play biopharma company.

French President Emmanuel Macron has sought in recent years to beef up the country’s tools to protect domestic firms from foreign buyers with deep pockets, especially in the US and China. Yet at the same time, he has made a priority of labor reforms that encourage foreign investment to boost growth.

There will be a three-way agreement between CD&R, Opella and the government to formalize commitments on the business, the officials said, adding that based on informal exchanges, there was no strong opposition at this stage from CD&R.

Sanofi would retain a 50% stake in Opella, which also sells laxative Dulcolax and Icy Hot pain relief gel.

After the Covid pandemic laid bare France’s dependency on foreign suppliers of medicine, Macron made a plea to make France more independent when it comes to drugs. Sanofi agreed to supply an active ingredient in Doliprane from a France-based supplier. The ministry said that the government will make sure this agreement still stands.

The government has previously blocked deals in sectors it deems sensitive, in the name of sovereignty, via its investment screening procedure. The process formally starts once companies have entered exclusive talks, the officials said, but typically involves informal discussions beforehand.

There have been talks in the background for months, despite the lack of a government in France this summer following snap elections lost by Macron, the officials said.

The previous finance minister, Bruno Le Maire, rebuffed a $20 billion takeover bid from Canada’s Alimentation Couche-Tard Inc. for supermarket chain Carrefour SA, citing food security issues that became paramount during the pandemic.

(Updates with details from finance ministry briefing)

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