Deal Overview
On October 21, 2024, Sanofi (NASDAQ: SNY US (ADR), $53.83, Market Cap: $136.6 billion, EN Paris: SAN FP, €100.04, Market Cap: €126.9 billion) announced that it has entered into exclusive negotiations with the US private equity firm Clayton, Dubilier & Rice (CD&R) to transfer around 50% controlling stake in Opella. Opella is Sanofi’s consumer healthcare business unit focusing on over-the-counter medicines, vitamins, minerals, and supplements and includes brands such as Allegra, Doliprane, and Dulcolax.
Following the proposed stake sale, Sanofi would remain a significant shareholder backing Opella, and CD&R and Sanofi together will support Opella’s growth strategy as a pure-play, global, and fast-moving consumer healthcare company. The divestment will lead to the creation of a new, standalone leader in consumer healthcare while supporting Sanofi’s strategy and increased focus on innovative medicines and vaccines.
The proposed transaction is subject to the finalization of definitive agreements, completion of the appropriate social processes, and subject to customary statutory approvals. The anticipated closing of the transaction would be in 2Q25 at the earliest. The deal values Opella at around €16 billion, implying 14 times the 2024 estimated EBITDA.
French public investment bank Bpifrance is expected to participate as a minority shareholder, taking a stake of around 2% in Opella and taking over a seat on its board under the current plan.
Previously, on October 27, 2023, Sanofi announced its plans to separate its Consumer Healthcare Unit (CHH) and Pharmaceutical and Vaccine business into two independently operated companies under its ‘Play to Win’ strategy. The company was actively considering various options for a potential separation, but it was expected that a capital market transaction would be the preferred method for spinning off CHH to maximize shareholder value. The spin-off was expected to be completed by 4Q24, subject to final approval from the Board of Directors, and regulatory authorities.
Deal Rationale
As part of restructuring efforts, in December 2019, Sanofi initiated ‘Play to Win’ strategy under the leadership of new CEO Paul Hudson to enhance growth and foster innovation. Since the leadership change in 2019, Sanofi has been undertaking major corporate transformation efforts in a bid to address long-standing issues that have affected its performance in the past. In line with this vision, the new CEO restructured Sanofi’s business operations into three distinct Global Business Units (GBUs): Speciality Care GBU, Vaccines GBU, and General Medicine GBU. Furthermore, he established a dedicated, independent business unit for the Consumer Healthcare (CHH) division, with a primary focus on integrated manufacturing and research and development functions.
The Biopharma business of Sanofi, which consists of the Pharmaceuticals and Vaccines business, contributed ~87.8% of FY23 total revenue. Under the ‘Play to Win’ strategy, the management wants to focus on the core Pharmaceutical and Vaccine business. The company expects a strong drug pipeline, backed by strong research and development (R&D) outlay to drive sustainable, long-term growth for the Biopharmaceutical business. On the other hand, Consumer Healthcare contributed ~12.2% of FY23 revenue. The segment has some of the renowned brands under its umbrella like Dulcolax, EVE, Allegra, Avil, Combiflam, DePura. Since the CHH unit is operating as an independent unit under Sanofi, it has improved its performance with more predictable cash flows.
In the past, many pharmaceutical companies have opted to shed lower growth, lower margin and non-core or off-patent businesses to focus on their core business. The recent ones are Johnson & Johnson’s spin-off of consumer healthcare business as Kenvue Inc. (KVUE), and GSK’s spin-off of Haleon Plc (HLN). Similarly, Novartis (NOVN) spun-off generic and bio-similar drugs business of Sandoz (SDZ). In an effort to align itself with industry peers, Sanofi also endeavoured to transform into a biopharmaceutical company by spinning-off its Consumer Healthcare unit. Additionally, historically, Sanofi had a low R&D productivity, through spin-off it can streamline its R&D spend and can improve the productivity. Moreover, the company expects ~ €2.0 billion cost savings from 2024 until end of 2025 which the management expects to reallocate to fund innovation.
Sanofi’s decision to cancel the spin-off of its consumer healthcare business and go ahead with a sell a 50% stake to CD&R reflects a strategic shift aimed at focusing more on its core pharmaceutical and biotech operations. By retaining half ownership, Sanofi can still benefit from the consumer healthcare market while freeing up resources for R&D in high-growth areas like specialty care, vaccines, and oncology. This partial sale offers a capitalefficient solution, avoiding the risks and complexities of a full spin-off while raising funds. Partnering with CD&R brings operational expertise, which could enhance the consumer unit’s efficiency and market competitiveness. Additionally, Sanofi retains influence over the business, allowing flexibility for future strategic decisions. Overall, this move de-risks the business while supporting Sanofi’s long-term growth goals.
Company Description
Sanofi (Parent)
Incorporated in 1994 in France, Sanofi (initially Sanofi Aventis) is a global healthcare company involved in the research, development, manufacturing, and marketing therapeutic solutions. The company operates through Pharmaceuticals, Vaccines and Consumer Healthcare divisions. The company aims to concentrate on crucial investment areas such as oncology, immunology, hematology, neurology, and vaccines. With a substantial global workforce numbering 91,000 employees, Sanofi has established a notable presence, operating manufacturing sites in 75 countries and conducting business in over 90 countries. Its healthcare solutions are available in more than 180 countries worldwide.
Consumer Health Company (Opella) (Sold-Out entity)
Headquartered in France, Opella employs over 11,000 people, operates in 100 countries with 13 industrial manufacturing facilities, and generated $5.6 billion in revenue during FY23. By divesting, the company has refined its offerings and now sustains a collection of 140 brands, reduced from the prior 250. Its portfolio primarily encompasses products related to Pain and inflammation, Digestive wellness, Allergy, Cough, cold and flu, as well as Physical and mental wellness.