Sanofi-Aventis Takeover Battle Ignites Political

UNCLAS FRANKFURT 000737 SIPDIS STATE PASS TO ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE DEPARTMENT FOR EUR/AGS, EUR/ERA, AND EB/TPP/ATT/ATP STATE PASS USTR TREASURY FOR OAISA SOBEL HARLOW CARNES HHS FOR FDA USDOC FOR COMMERCIAL SERVICE E.O. 12958: N/A TAGS: ECON ETRD PGOV GM SUBJECT: Sanofi-Aventis Takeover Battle Ignites Political Dispute over Jobs ¶1. Sanofi-Synthelabo's bid to take over French-German pharmaceutical company Aventis has sparked resistance in Germany, particularly over French government remarks suggesting that Germany will absorb all the job losses. ¶2. The Sanofi-Synthelabo bid is facing fierce resistance in Hesse, location of Aventis' German headquarters and its largest production facility. (NOTE: Aventis dates from the 1999 merger of Rhone-Poulenc and Hoechst, the world's biggest pharmaceutical company until the 1990's; it employs 9000 people in Germany, of which 7800 in the Frankfurt area -- END NOTE). At the center of controversy are the French government's apparent support for the Sanofi bid and remarks Monday by French Social minister Francois Fillon that jobs in France are not at stake (implying that Aventis' operations in Germany are at risk). The takeover would create the world's third largest pharmaceutical company. ¶3. Hesse Minister-President Roland Koch (CDU/Christian Democrats) sharply criticized the French government's role in Sanofi's takeover plans ("this is not how partners treat each other") and said Sanofi intends to transfer "a great deal" of Germany's biotech competence to France and with it thousands of jobs. Hesse SPD caucus chief leader Juergen Walter criticized the bid as the product of an "aggressive French industrial policy that goes far over the top." German chemicals union IG-BCE warned of a catastrophe for German biotech if Sanofi succeeds. Aventis opposes the Sanofi bid and is looking for an alternative partner. ¶4. The German government is reportedly engaged on the issue at the national level. According to media reports, Economics/Labor Minister Wolfgang Clement (SPD) is in talks with the French government and with various companies. ¶5. COMMENT. The issues involved in the Sanofi-Aventis takeover battle -- and resistance to the French government's apparent role -- are politically salient in Germany. The Hesse State Chancellery believes that political support for Aventis in Germany will prevent the takeover. The Frankfurt Economic Promotion Board points to the one billion euros Aventis has invested in Frankfurt over the last five years (including the world's largest production site for inhalable insulin). The Aventis works council in Frankfurt says the Sanofi-Synthelabo bid is a desperate move to save Sanofi itself being taken over and points out that Sanofi would likely dissolve the Hoechst holding company (making the merged company exclusively French). Sources in the Hesse Economics Ministry say Aventis probably cannot ward off takeover unless it can find another partner.