The news that the makers of France's popular paracetamol brand, Doliprane, is being sold by French owners Sanofi to an American firm has caused an outcry in the country. Indeed, it is possible that the affair could become another Alstom scandal, reproducing the furore that followed General Electric's takeover of a French engineering firm nearly a decade ago.
Doliprane is ubiquitous in French pharmacies and for consumers it has become a household name. But even though they were expecting some strong reactions, the government and pharmaceutical giant Sanofi probably did not anticipate quite the uproar sparked by the announcement of the sale of the makers of France's best-selling drug.
Since the pharmaceutical group declared on October 11th that it had entered into exclusive negotiations with the American private equity firm Clayton, Dubilier & Rice (CD&R) to sell a 50% controlling stake in Opella - Sanofi's over-the-counter pharmaceutical branch which makes Doliprane - there has been a widespread backlash.
On Sunday the industry minister, Marc Ferracci, tried to defuse the situation by promising to secure “strong and written commitments” from the New York-based firm. On Monday economy minister Antoine Armand visited the factory at Lisieux in northern France where Doliprane is produced to try and ease the concerns of the 250 employees who are currently on strike. He assured them that jobs would be maintained in France. However, the employees have long learned that promises only bind those who receive them.
Enlargement : Illustration 1
Condemnation of this deal has been unanimous and more and more figures from both the Left and the Right are calling for the sale to be blocked. “The president is making sure 'Emily in Paris' stays in France. I’d rather he ensured that Doliprane stays in France,” said Olivier Faure, first secretary of the Socialist Party (PS), after the head of state said plans for the character in the hit Netflix show to relocate to Rome “didn't make sense”.
In a sign of the seriousness of the situation 62 MPs from the centrist and centre-right Ensemble pour la République (EPR), MoDem and Horizons parties, plus the conservative Droite Républicaine (formerly Les Républicains), have co-signed a letter to the French Ministry of Finance and Economy. In it they attack the “state’s passivity” in the face of pharmaceutical businesses leaving France. “We also protested in the spring to oppose the sale of [generic drug maker] Biogaran,” they point out.
Fears over health security
Regardless of political affiliation, all opponents stress their fears about France losing its industrial and health sovereignty. Indeed, Emmanuel Macron made specific commitments on this issue during the COVID pandemic. At that time, France - like all European countries and the United States - discovered its extreme dependence and vulnerability in healthcare: more than 80% of the active ingredients used in key medicines were being imported from India and China.
As shortages at the time loomed, particularly with paracetamol, the president pledged a recovery plan to ensure health security in France. A public investment programme of 150 million euros was launched to produce paracetamol in the Toulouse region in south-west France. “What will become of this investment if these activities come under American control? There are genuine concerns about future outlets. The Lisieux factory alone produces 450 million packets per year,” warns PS Member of Parliament, Philippe Brun, a co-signatory of an open letter demanding the halt of the sale by Sanofi.
A protected group
The anger felt by political leaders is strengthened by their view that the country's authorities have bent over backwards to support Sanofi in recent times. For years the pharma group has been the leading beneficiary of research tax credits. Over the past decade it has received around 1.5 billion euros through this mechanism. This did not, however, stop the pharma firm from massively cutting jobs at its French research and development centres and relocating them to low-cost European countries such as Slovenia and Romania. Once touted as the world leader in vaccines, the group was unable to develop a COVID vaccine in time.
Although Sanofi has long aligned its strategy with that of major global pharmaceutical companies, and its centre of gravity has long since shifted to the United States, the group has maintained its image as a French group - with the help of state subsidies. A desire to keep pharmaceutical production activities in France, while safeguarding Sanofi’s shareholder interests, explains why successive governments have introduced a number of different measures to protect the company.
This is particularly true for Doliprane itself. “For years, the Ministry of Industry has opposed allowing Doliprane to be substituted with a generic product,” points out Philippe Brun. In other words, when a doctor prescribes Doliprane, the pharmacist cannot replace it with an equivalent, cheaper, medication and is required to dispense the Sanofi brand name. The cost to the country's health and social security system of this practice runs to tens of millions of euros a year. Sanofi itself makes a net margin of 23% on every packet sold.
Major spin-offs
But this is no longer enough for Sanofi. Like all its major competitors, the pharmaceutical group now believes there is no longer much to gain from selling over-the-counter medication, which it considers too low-margin and prone to rapid competition as intellectual property rights fall into the public domain.
All the major players, starting with Johnson & Johnson, Pfizer, GSK and Merck, have launched large spin-off operations to sell off or list the less profitable parts of their businesses on the stock market, in order to “unlock value for shareholders”. Sanofi has now decided to follow the same path. “Belatedly,” complain some investors and analysts, who feel that the group has not done enough to look after them.
Since becoming chair of Sanofi’s board of directors in May 2023, Frédéric Oudéa, the former chief executive officer of bank Société Générale, has appeared determined to press ahead with the new strategy. In October 2023 the group announced its intention to siphon off its consumer healthcare activities, which were grouped together under the name Opella, and it accelerated the restructuring of its portfolio. From 251 brands at the end of 2020, it now has just 115.
Initially, the group plans to sell 50% of the capital in Opella. But as it acknowledges, it has no intention of keeping its remaining stake “for ten years.” This spin-off “aims to maximise value creation and reward Sanofi’s shareholders”, the group’s board of directors reminds us. The sale is based on a valuation of around 15 billion euros.
Lofty oversight by Alexis Kohler
No longer feeling obliged to display any particular deference, Sanofi did not even bother to inform the government in advance of its decision to divest itself of Opella. In fact, it had told them just the opposite only a few weeks earlier.
The discovery last year that the pharmaceutical group did after all intend to sell came as unwelcome news to the Ministry of Industry. Opella in France represents some 950 jobs, including 250 in Lisieux and 300 in Compiègne, both in northern France, and it makes the country’s best-known brand of medicine. The line then taken by Roland Lescure, who was industry minister at the time, was clear: everything had to be done to keep this business in France. Preference was to be given to a takeover of Opella by a French private equity firm.
Enlargement : Illustration 2
However, in the wake of the dissolution of the National Assembly in June and then the seemingly endless period of caretaker government after the subsequent election's inconclusive outcome, Alexis Kohler took control of the situation. The secretary-general of the Élysée – President Macron's chief of staff - clearly has no intention of relinquishing even an ounce of the power he has accumulated over the past seven years on financial and industrial matters, despite recent political developments. He planned to oversee this operation himself; and did not remotely share the Ministry of Industry’s view of the situation.
On September 18th, between Michel Barnier's appointment as prime minister on September 5th, and the announcement of the new government ministerial team on September 21st, Alexis Kohler met with the French investment fund PAI, as was subsequently reported by La Lettre independent news site. PAI had put together a bid to acquire Opella with the backing of sovereign funds from Abu Dhabi and Singapore, as well as the British Columbia pension fund. Alexis Kohler, however, seemed to harbour doubts about the seriousness of this proposal. He had questions about governance, a matter on which the president's chief of staff has shown himself particularly exacting.
Above all, PAI's offer disrupted Sanofi's plans, which are backed by the Élysée: for it had the potential to overshadow the bid from the American private equity company CD&R. This New York-based firm is “in favour at the Élysée”, to borrow an expression from Les Échos business newspaper. According to Mediapart's sources, representatives from CD&R also met with Alexis Kohler at the Élysée.
After these meetings, the tone changed. Though the Finance and Economy Ministry had initially appeared to advocate a French-led acquisition, the new industry minister, Marc Ferracci – who is incidentally very close to Emmanuel Macron – altered the approach. The priority was now to “protect the health of the French people”, “ensure health sovereignty” and “preserve jobs”. According to him, these were conditions that the American fund was absolutely capable of fulfilling. The government says it is prepared to impose “very strict guarantees” to ensure these commitments are met.
A hint of a conflict of interest
Less conspicuous than many of its competitor firms, CD&R is well-versed in standard takeover operations involving leveraged buy-outs (LBOs). It has already carried out several deals in France, including the takeover of the electrical distributor Rexel and the construction group Spie. This private equity firm, which has or has had some notable figures in American capitalism on its board – such as Jack Welch, the former president of General Electric (GE) until his death, and Raymond Conner, the former vice-president of Boeing – now appears to have set its sights firmly on France.
CD&R has brought on board figures such as Jean-Luc Bélingard, former president of biotech company BioMérieux, Jean-Michel Aubertin, former head of energy activities at Alstom, and Gilles Schnepp, former president of Legrand and current chairman of food company Danone. By a stroke of luck, Schnepp also sits on Sanofi’s board. However, this has seemingly raised no concerns about a possible conflict of interest: Gilles Schnepp is said to have abstained from voting when it came to entering exclusive negotiations with CD&R.
As with all its acquisitions, the New York company has come up with a well-proven structure: a modicum of equity and a mountain of debt. The debt, according to initial estimates by financial analysts, could range between 7 and 10 billion euros. This would the deal would be funded by borrowing that is some six to eight times greater than the amount of equity staked in it. Opella will be responsible for generating the financial resources necessary to pay the interest, repay the debt, and eventually buy itself back.
How will a company operating in more mature pharmaceutical markets, and facing higher structural costs as it will no longer be able to share them with its parent company, manage to cope and meet the demands of its new shareholders? The financial world has known the answer to this for decades: by cost-cutting, restructuring and outsourcing.
Indeed, Opella’s management does not hide this fact: the streamlining of its portfolio and manufacturing sites is not yet complete. It plans to focus on its most profitable brands, those with the highest global sales, such as its new anti-allergy product, sold in France under the name Allervi, which generated sales of 562 million euros in 2023. In this major overhaul Doliprane carries little weight: it is mainly sold in France and the country only accounts for 8% of its turnover, as its advisors are happy to point out.
The weapon of protectionism
Though France's Finance Ministry has emphasised the conditions it intends to impose on any deal, political figures from all sides are still raising the spectre of another Alstom affair; the French engineering company was dismantled in under two years after its purchase in 2015. None of the commitments made by General Electric at the time of Alstom's takeover were kept, and no sanctions were subsequently taken against the American giant.
“We must block this sale at all costs,” demand several MPs, while others call for the use of the Montebourg decrees which take their name from former economy minister Arnaud Montebourg. These were introduced at the time of Alstom’s takeover to protect key elements of economic sovereignty but were soon carefully dismantled by Emmanuel Macron, then minister of the economy, and his chief of staff, Alexis Kohler.
Under pressure, the president, current finance and economy minister Antoine Armand and Marc Ferracci, plus senior French Treasury officials, have reverted to the same arguments employed during the Alstom sale: that France must remain open to international investors if it wants to maintain its attractiveness.
Speaking in the National Assembly on October 15th, Antoine Armand again sought to allay fears over the proposed deal, insisting that the French government was considering having a representative on Opella's board of directors and taking a stake in the company. “I will tell you quite clearly, nothing is off the table, nothing is excluded,” he declared.
But critics are still worried and want the deal to be halted. “The United States is the first to veto sales they deem harmful to their interests,” insists Philippe Brun. Recently, for example, the US government opposed a takeover of US Steel by Japan's Nippon Steel.
Closer to home, the German government quickly wielded the weapon of protectionism to block Milan-based UniCredit’s attempted takeover of private bank Commerzbank. Emmanuel Macron, however, is sticking to his stance: any blocking measures would undo all his efforts or would even - as he feared in the case of a veto on the Alstom-GE sale - lead to France being seen by investors as a “Cuba without the sunshine”.
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- The original French version of this article can be found here.
English version and additional reporting by Michael Streeter