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Regulator Demands Divestiture In Asset Swap Deal Between Boehringer, Sanofi SA (ADR) (SNY)

Boehringer Ingelheim, a German pharmaceutical firm, are involved in plans to divest of five kinds of products for animal health. This is in an effort of settling charges brought by the Federal Trade Commission that an asset swap the companies are planning with Sanofi SA (ADR) (NYSE:SNY) would result in anti-competitive practices.

The Federal Trade Commission had argued that the asset swap deal would have reduced the level of competition in some segments of the pharmaceutical sector in the United States.

“[The proposed swap] would harm competition in the U.S. markets for various vaccines for companion animals (pets) and certain parasite control products for cattle and sheep,” the Federal Trade Commission stated.

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Reduce Competition

According to the FTC, if the asset swap deal was allowed to go ahead without the divestiture, it would have resulted in the number of suppliers of feline and canine vaccines being reduced from four to three. It would also have resulted in the top two suppliers of rabies vaccine transformed into one. Additionally, the asset swap deal would also have reduced the level of competition among suppliers of products used in the prevention of parasites in sheep and cattle.

In the proposed asset swap involving Sanofi SA (ADR) (NYSE:SNY) and Boeringer Ingelheim, the latter was to acquire the former’s animal care subsidiary for $13.5 billion. Sanofi, in turn, was to acquire Boehringer’s consumer health care business unit whose valuation was around $8 billion. The French pharmaceutical company was to add $5.5 billion in cash.

European Commission

Earlier in November, the European Commission had made the same demand as the Federal Trade Commission based on the same concerns that the deal, without the divestiture, would likely result in reduced competition which would in turn cause price increases. The two companies acquiesced to the demands of the European Commission and agreed to divest a number of pharmaceuticals such as Wellicox, Genixine, Allevinix, Equioxx Paste, Equioxx Injectable, and Ketofen. They also agreed to divest a couple of vaccines such as Progressis, Parvovurax, Parvovax, Mucossifa, and Circovac.

In Wednesday’s trading, shares of Sanofi SA (ADR) (NYSE:SNY) fell by 1.08% to close the day at $39.26 a piece. Shares of Eli Lilly and Co fell by 1.02% to close the day at $73.06.

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Note: This article is written by Andy Parker and was originally published at Market Exclusive.