French Drug Firms in Merger Deal

French drug makers Sanofi-Synthelabo and Aventis announced plans Monday to create the world’s third-largest pharmaceutical company after Sanofi increased an earlier hostile bid for Aventis.

The cash-and-stock deal was valued at $63.2 billion.

The agreement ended a bitter three-month struggle for control of Strasbourg-based Aventis, which had also been pursued by Swiss giant Novartis. Late Sunday, European Union regulators approved the deal.

The breakthrough came earlier in the day when 13 of Aventis’ 16 board members voted to recommend a sweetened Sanofi offer to their shareholders, transforming what was a hostile takeover bid into a merger.

Faced with the possibility of a competing bid from Novartis, Sanofi’s board agreed to raise its offer at an emergency meeting Saturday.

The two companies confirmed Monday that Paris-based Sanofi had increased the cash part of its offer for Aventis to $19 billion from $10.9 billion. The remainder of the deal is in stock, and based on Friday’s closing price, the acquisition was valued at $63.2 billion.

Sanofi Chairman and Chief Executive Jean-Francois Dehecq maintained that despite the hefty final price tag, the original decision to launch a hostile offer had been the right one -- avoiding the lengthy negotiations and strategic compromises a friendly approach would have entailed.

Dehecq would stay on as head of the new company, and Aventis CEO Igor Landau would step down, both companies said.

The merger, which must be approved by shareholders, would create the world’s third-largest pharmaceutical group, behind U.S. giant Pfizer Inc. and Britain’s GlaxoSmithKline. Its board and management would be evenly split between former Aventis and Sanofi staff.

French ministers confirmed the deal late Sunday as Novartis announced it was pulling out of the race for Aventis, citing the “strong intervention of the French government.”

Prime Minister Jean-Pierre Raffarin said the Sanofi-Aventis merger was in France’s “strategic interests.”