Hostilities are over, and damsel in distress Aventis (NYSE: AVE ) will ride off into the sunset with Sanofi-Synthelabo (NYSE: SNY ) . The two French drug companies have been engaged in an elaborate ritual that often accompanies a proposed hostile takeover.
The drama began three months ago when Sanofi bypassed the management at Aventis and tendered a bid for the company. Aventis promptly rejected the original offer of $57 billion for not being in the best interest of shareholders and not being enough money. Hostilities between the two companies began in earnest. The combatants fired volley after volley in an attempt to shoot holes in each other's argument.
Aventis contended that Sanofi was trying to shore up weaknesses in its pipeline and its core business. The company also warned that existing drug development partnerships with other pharmaceutical companies would be nullified. And then, of course, there was the issue of money -- the bid was just too low.
Sanofi countered that it would bring synergy to the deal by revamping Aventis' stodgy research and development, and improving lab productivity. It would focus on Aventis' oncology pipeline and put more money into the vaccine business.
Both companies began to trot out promising new drugs from their pipelines in an effort to prove their positions. Aventis unveiled an injectable medication to rival Botox for treatment of wrinkles. It also emphasized that a potential blockbuster antibiotic, Ketek, was nearing approval in the U.S. (the Food and Drug Administration has since approved it).
Sanofi, not to be outdone, released news of its most promising drug in development -- rimonabant. This medication may be prescribed to help curb obesity and smoking and could be a big seller. Sanofi also pledged to attempt to quadruple the revenue from its oncology segment.
To make things more interesting, the French government voiced its opposition to Aventis inviting Swiss drug maker Novartis (NYSE: NVS ) to become a white knight and make a friendly bid for acquisition. France is fiercely protective of its businesses and has long fought to form huge French companies that can compete globally. The government was far more interested in an all-French Sanofi/Aventis merger than allowing a Swiss company to acquire Aventis and become the second-largest drug company in the world.
On Friday, it appeared that in spite of the French government's opposition, Novartis was ready to enter into formal merger discussions with Aventis. Then, in a somewhat surprising turn of events, on Sunday evening, Aventis announced it had accepted a sweetened offer from Sanofi. The revised bid was for $63.81 billion, and the merger will create the third-largest drug company in the world, behind Pfizer (NYSE: PFE ) and GlaxoSmithKline (NYSE: GSK ) . The French prime minister welcomed the decision.
And in the end, all it took was a few billion extra dollars and the matchmaking influence of the French government to bring the deal to a close. Champagne corks are popping all over France.
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Fool contributor J. Graham owns shares of Pfizer and Novartis.
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