AMSTERDAM (Reuters) – A bidding war around Solvay’s drugs unit appeared to be emerging after a reported bid from Abbott valued the unit at up to 5 billion euros, rivaling an earlier, lower offer from Nycomed.
The Wall Street Journal reported that Abbott has emerged as a strong competitor to buy Solvay’s drugs unit as it battles with rival Nycomed to secure a deal that could be valued between 4 billion and 5 billion euros ($7.4 billion).
“There is now a potential for higher proceeds from this disposal,” Bank Degroof analyst Bernard Hanssens said.
Shares in Solvay, which have risen 46 percent since it announced a review of its strategy in April, rose 3.8 percent to 76.99 euros by 1006 GMT to be the second top gainer in the DJ Stoxx European Chemicals index, which was up 0.24 percent.
The WSJ also reported that Belgian pharmaceutical company UCB is also considering a bid for the Solvay unit, but a UCB spokeswoman declined to comment.
Solvay, one of few drug-chemicals hybrids left, started a the review of its drugs unit in April, saying all options are open, including whether to sell, float, retain the unit or make acquisitions of its own. It is widely expected to sell the unit to fund acquisitions.
KBC Securities analyst Wim Hoste said he expects Solvay would want to get at least around two times EV/sales for the pharma unit, which values the unit at about 5.4 billion euros.
But RBS analyst Mutlu Gundogan previously valued the unit at 4.7 billion euros and stressed that the market assumes the sale will materialize at the high end of the 4 billion to 5 billion range.
“Failing to do so could result in a significant fall in the share price,” he had said.
Solvay declined to comment on the WSJ report, while Abbott was not immediately available for comment. Under Belgian law, Solvay would not necessarily have to issue a statement about the future of its pharma unit until it took a decision.
Private equity-owned Swiss drugmaker Nycomed recently made a fully financed 4 to 4.5 billion euro offer to buy Solvay’s drug unit, people familiar with the matter told Reuters last week.
A Nycomed-Solvay pharma combinations would earn in excess of 6 billion euros in annual sales with drugs to treat heart, gastrointestinal and central nervous diseases.
For Abbott, a deal with Solvay means it would take full control of a new generation cholesterol treatment called TriLipix, which was approved for the U.S. market last year after co-development with Solvay. Both firms also co-market the cholesterol treatment Tricor.
Abbott has had an appetite for acquisitions this month, buying medical device company Evalve Inc for $410 million and buying eye treatment firm Visiogen Inc for $400 million.
Its reported bid for Solvay’s drug unit comes after market talk it had dropped out of the initial running for the unit, while UCB’s possible interest is also surprising as the company was earlier suggested as a possible M&A target for Solvay.
KBC analyst Hoste said he believes it is unlikely UCB would consider a bid as the company still has more than 2 billion euros of debt from previous acquisitions to be paid back before the end of 2011 and Solvay’s products do not match its strategy.
There is, however, a shareholder overlap to suggest potential rationale for a buyout by UCB.
The Janssen family, which is UCB’s largest shareholder with a 38 percent stake in the firm according to Thomson Reuters data, also owns a stake in Solvac, the holding company that owns a 30 percent stake in Solvay for the Solvay family.
By Aaron Gray-Block
(Additional reporting by Philip Blenkinsop in Brussels, Editing by Hans Peters)