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Sanofi-aventis (SNY) Moves to Acquire BMP Sunstone, Solidifying Already Strong Position in the Chinese Consumer Healthcare Market

Sanofi-aventis, – one of the top pharmaceutical companies engaged in discovery/development/distribution, reported yesterday in concert with China-focused specialty pharmaceutical firm BMP Sunstone (BJGP), entry into a definitive agreement whereby SNY will acquire all outstanding shares of BJGP.

The price tag on the deal is roughly $520.6M (fully diluted) or a cash consideration of $10/share, representing a 30% premium above the Oct. 27 close of BJGP stock and was unanimously approved by the board of directors at BJGP.

The recently established Hangzhou Sanofi Minsheng Consumer Healthcare joint venture will be magnified by the BJGP acquisition, putting SNY in prime market position to drive massive sales in vitamins and mineral supplements as well as cough and cold, two of the biggest categories.

CEO of SNY, Christopher A. Viehbacher, called the deal a real boon for the Company as it will enable not only leveraging of the strong consumer healthcare segment, but also grant ready access to many new/expanding distribution channels in China, channels which are anticipated to represent up to a third of the entire Chinese pharmaceutical market in the coming years.

With sales of $147M in 2009, BJGP calculates that 60% of sales were in the consumer healthcare segment via access to a network of Tier 3-4 market entities, ranging from retailers to county hospitals and community clinics.

This is an incredibly cunning tactic for SNY as BJGP already has a massive footprint and two of China’s top/most widely-known brands in the consumer healthcare segment:

• Hao Wa Wa – recently selected as China’s number one pediatric cough and cold brand
• Kang Fu Te – a women’s healthcare hygiene brand

CEO of BJGP, David (Xiao Ying) Gao, called the deal a major opportunity for shareholders in both companies and especially for the personnel/infrastructure of BJGP.

The rapid growth of China’s consumer healthcare market and its promising future constitute a perfect example for SNY of a core growth platform.

As the 5th largest globally in terms of consumer healthcare, SNY is making a huge move here to establish dominance in China, where the market has quickly become the second largest worldwide (EUR12B in 2010, estimated CAGR of 11% since 2005).

Terms of the agreement stipulate transaction completion is contingent upon approval at the BJGP stockholder’s meeting (23% of fully diluted shares already promising a yes vote), some regulatory approvals in China and ancillary conditions.

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