Sanofi-aventis has inked an agreement to buy Chattem Inc. for $1.9 billion, a deal that the drug makers say would create the world's fifth-largest consumer health care company.


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Sanofi-aventis in deal to acquire Chattem

December 21st, 2009

PARIS – Sanofi-aventis has inked an agreement to buy Chattem Inc. for $1.9 billion, a deal that the drug makers say would create the world's fifth-largest consumer health care company.

Under the terms of the transaction, sanofi-aventis said Monday that it is making a tender offer to purchase all of the outstanding shares of Chattem at $93.50 per share in cash.

After that offer is completed, the company said, a subsidiary of sanofi-aventis will merge with Chattem and the outstanding Chattem shares not tendered in the initial tender offer will be converted into the right to receive the same $93.50 per share in cash paid in the tender offer. The tender offer will begin in January, and the companies expect the transaction to close in the first quarter of 2010. Chattem's board has unanimously approved the transaction, the two firms said.

In addition, sanofi-aventis announced Monday that it aims to convert its Allegra antihistamine (fexofenadine HCl) in the United States from a prescription medicine to an over-the-counter product. Once that occurs, Chattem would assume responsibility for the Allegra brand.

"The acquisition of Chattem will be a significant milestone in sanofi-aventis' transformation strategy and will provide us with the ideal platform in the U.S. consumer health care market, which represents 25% of the current worldwide opportunity," Christopher Viehbacher, chief executive officer of Paris-based sanofi-aventis, said in a statement.

Sanofi-aventis noted that even though it will generate around 1.4 billion euros worldwide in O-T-C sales this year, so far the company has not had a direct presence in that market segment in the United States.

"In addition, we believe our ability to convert prescription medicines to O-T-C products will be enhanced by Chattem's leading sales, marketing and distribution channels," Viehbacher explained. "We have great respect for Chattem's world-class management team, which has an excellent track record of sales and earnings growth based on building strong brands. With the potential access to switch products such as Allegra, I believe this team will take Chattem to even higher levels."

Also, sanofi-aventis said it expects significant revenue synergies to be obtained through the expansion of Chattem's products into geographic markets where sanofi-aventis has a strong operating presence, particularly in emerging markets.

Chattem's roster of brands includes such well-known names as Gold Bond, Icy Hot, ACT, Cortizone-10, Selsun Blue and Unisom. The Chattem corporate brand would be retained under the acquisition arrangement.

"This transaction offers immediate and significant value for Chattem's shareholders and important benefits to our employees, customers and community," stated Zan Guerry, chairman and CEO of Chattem, based in Chattanooga, Tenn. "I am excited to work with the sanofi-aventis team to capture the significant growth opportunities this combination creates, as highlighted by the planned launch of Allegra. Chattem will form the base of a new consumer health care business in the United States for sanofi-aventis, and the headquarters, manufacturing and leadership team will continue to be based in Chattanooga."

Plans call for Guerry and Chattem's senior leadership team to lead sanofi-aventis' U.S. consumer health division after the acquisition closes, the companies said. Sanofi-aventis also announced that it would maintain both of Chattem's current manufacturing facilities and will continue construction on the third.

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