(Bloomberg) -- Sanofi is nearing the sale of its consumer health business to Clayton Dubilier & Rice, a year after Chief Executive Officer Paul Hudson announced plans to split off the division to concentrate on developing innovative medicines.
The French drugmaker is in talks to sell a 50% controlling stake in the unit to the US buyout firm, Sanofi said Friday, confirming a Bloomberg News report that it was close to an agreement with CD&R. Financial terms weren’t disclosed, but people familiar with the matter said earlier that the deal would value the unit at about €15 billion ($16.4 billion).
With the step, Sanofi would join the ranks of big pharma peers GSK Plc, Novartis AG, Pfizer Inc. and Johnson & Johnson, all of which have split off their consumer health divisions in recent years to free up resources for developing next-generation therapies for cancer, rare diseases and other ailments. The aim is to turn Sanofi, for the first time, into a pure play biopharma company, Hudson has said.
For the company, what “matters the most at the end of the day is a focus on innovation growth drivers,” said Florent Cespedes, an analyst at Bernstein.
The stake Sanofi will retain is higher than the roughly 30% that Cespedes had estimated. Still, it fits with the sale to private equity, he said, meaning risks should be shared between Sanofi and the buyer, while also allowing the drugmaker to capture future value.
Some of the proceeds of the sale could be used for stock buybacks, which are “definitely something that investors want to see,” said Barclays Plc analyst Emily Field. Whether the funds will be used for acquisitions is an open question, she said.
The structure of the deal, with Sanofi retaining a sizable holding, could also be seen as a way to address any regulatory concerns, said Field. The French finance ministry said Friday it would expect commitments from Sanofi and CD&R, including keeping the unit’s key decision-making sites in France and maintaining its French industrial footprint.
The unit, called Opella, sells over-the-counter medications, including pain reliever Doliprane, laxative Dulcolax and Icy Hot pain relief gel. Sanofi said it will provide updates on the separation when a decision is made.
The drugmaker’s shares were little changed in Paris trading. The stock has gained about 12% this year, roughly in line with the rise in Bloomberg’s European pharmaceuticals index.
Europe’s Biggest Deal
If the demerger occurs at a valuation of €15 billion, it would make the deal the largest in Europe this year, according to data compiled by Bloomberg. It will be seen as a sign that health-care dealmaking in Europe is on the upswing, and add to the $475 billion in deals already announced this year for European businesses, a 64% increase from this point in 2023, the data shows.
CD&R, which raised a record $26 billion buyout fund last year, saw off interest from rival PAI Partners for the Sanofi unit, the people familiar said.
The US firm, founded in 1978, has been an active investor in France in recent years, teaming with Permira in July in an offer to take cybersecurity company Exclusive Networks SA private. It’s also an investor in Mobilux, one of the largest home equipment retailers in France.
--With assistance from Swetha Gopinath and Michael Hytha.
(Updates with analyst comments from fourth paragraph)
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