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France’s industry minister has said that the option of blocking a €15.5bn deal to sell Sanofi’s consumer pharmaceuticals division to US private equity fund Clayton, Dubilier & Rice is “absolutely on the table” if the government’s requirements are not met.
“Legally, we can oppose it,” industry minister Marc Ferracci said on France Inter radio on Tuesday as a political backlash against the potential deal flared. He added that the government was asking the French pharmaceutical company and the proposed buyer for commitments on employment, industrial footprint, volume productions in France and research and development. “If these commitments are not made, there are options in the regulatory code for blocking this sale.”
The requirements by French officials are not new and were previously expressed during the sale process, but they have taken on a political dimension since Sanofi announced CD&R’s offer had triumphed over a consortium led by French private equity group PAI last week.
The deal, which values the business at €15.5bn and would be one of Europe’s biggest this year, is not yet closed and negotiations are continuing between the parties.
Under the terms being discussed, Sanofi would keep a 50 per cent stake in the consumer business — dubbed Opella — but would sell a 50 per cent controlling stake to CD&R. Ministers this week also raised the possibility that a state investment entity, such as Bpifrance, could also take a stake to act as a guarantor for French interests.
On Monday finance minister Antoine Armand assured during a visit to a Sanofi factory with Ferracci, that Doliprane — a brand of paracetamol produced by Sanofi — “will continue to be produced in France”.
Sanofi’s divestment of its consumer business has sparked a backlash because France typically is protective about foreign takeovers of its largest companies, and also because instances of shortages affecting medicines such as insulin and childhood vaccines have risen fourfold to reach about 1,600 in 2023, according to a report by the French senate.
During the Covid-19 pandemic, the government rationed paracetamol, which is the most frequently bought medicine in the country. Sanofi itself came under fire for failing to produce a Covid vaccine despite being one of the top vaccine makers in the world at the time.
While CD&R appears poised to clinch the transaction, people close to PAI have argued that the French nature of the fund could help assuage some of the sovereignty concerns. However, PAI is working with far less financial firepower compared with CD&R, which raised a record €26bn last year.
PAI teamed up on its offer with partners including Singapore’s GIC and the Abu Dhabi Investment Authority to give it more financial muscle, but it means PAI would be a minority within the consortium it leads.
Someone with knowledge of the proposed deal said that the political reaction in France was “not unexpected and not unusual” given “there are well-known social processes in France”, particularly when there was “seen to be an outside buyer”. They added: “Doliprane is a very important French product — it’s made in France and is in every medicine cabinet.”
CD&R and PAI declined to comment.
Critics also argue that Sanofi’s mooted deal undermines President Emmanuel Macron’s years-long push to reshore pharmaceutical production in the name of winning back sovereignty in important areas of the economy and creating more industrial jobs. In 2020, Macron set a goal of reviving paracetamol production in France, including its active ingredient which Sanofi sources from Asia, within three years — a goal that has not been met.
The spat has become an unwanted problem for the new minority government led by Prime Minister Michel Barnier, forcing it into the uncomfortable position of arguing that a divestment does not break Macron’s earlier promises.
Politicians from across the spectrum have come out against the deal. About 60 lawmakers from the three parties within Macron’s own centrist group have signed an open letter addressed to the finance minister saying the divestment “completely contravenes” the “priority” of making France more self-reliant in healthcare. They called on the ministry to “immediately activate an inspection of the proposed operation so as to evaluate the need to block it or not”.
Far-right National Rally president Jordan Bardella said the divestment continued the “fire sale of France”, a reference to other big companies that have been sold to foreign buyers only to be hit with lay-offs, such as the 2014 sale of Alstom’s energy business to General Electric. “The risk to our health sovereignty and employment are considerable; it would be incomprehensible for the state to let this happen,” Bardella said.
Additional reporting by Alexandra Heal