L’Oréal: Sanofi And Synthélabo To Merge: Elf Aquitaine And L’Oréal To Hold 35.1% And 19.4% Shareholdings Respectively In The New Group Group

  • Elf Aquitaine and L'Oréal announce plan to merge their pharmaceutical subsidiaries into a new company, Sanofi-Synthélabo.

  • Elf Aquitaine and L'Oréal to hold 35.1% and 19.4% respectively of the capital in the new group.

  • Elf Aquitaine and L'Oréal to sign a shareholders' agreement ensuring shareholder stability of the new group

  • Sanofi-Synthélabo will be the 6th largest pharmaceuticals group in Europe and will rank among the top 20 in the world:
         * Sanofi and Synthélabo have strong complementarity in the therapeutic areas of central nervous system, cardiovascular, oncology and internal medicine.
         * The new group to continue each company's strong profile of current earning growth with excellent longer term prospects.
         * The two companies' combined pro-forma research and development spending for 1998 will be close to FF6 billion.

The Boards of Directors of Elf Aquitaine (NYSE:ELF) and L'Oréal today approved the project to merge their respective pharmaceutical subsidiaries, Sanofi and Synthélabo, into a new group called Sanofi-Synthélabo. The merger meets the two parent companies' objectives of creating an important pharmaceuticals group.

With pro-forma 1998 sales of approximately FF35 billion, the new group will be the sixth largest pharmaceuticals group in Europe and will rank among the top 20 worldwide. Sanofi-Synthélabo will have an enhanced base to greatly increase its development in the US market. The new group will have an outstanding portfolio of current products, and an enhanced research and development capacity both in terms of budget and products in the pipeline.

The merger will be carried out with Sanofi and Synthélabo being absorbed by a new company, Sanofi-Synthélabo, which will be listed on the Paris stock exchange. The institution of double voting rights are planned for Sanofi and Synthélabo shareholders who have held nominative shares for more than two years.

Based on an agreed exchange ratio of 13 Sanofi shares for every 10 Synthélabo shares, Elf Aquitaine and L'Oréal will respectively hold 35.1% and 19.4% of the capital and approximately 45% and 25% of the voting rights in the new group. Each company will report its shareholdings in its consolidated financial statements using equity accounting.

In order to jointly ensure the stability of the new group, Elf Aquitaine and L'Oréal will sign a shareholders' agreement for a period of at least six years, providing for joint consultation and agreement in respect to all important decisions regarding Sanofi-Synthélabo. During this period, it is intended that both Elf Aquitaine and L'Oréal will each retain shareholdings to approximately 20% of the capital of the new group. The additional shares held by Elf Aquitaine are not subject to the agreement, although there are no current plans to dispose of them.

Of a total 12 members, Elf Aquitaine and L'Oréal will name four and three members respectively to the new group's Board of Directors. It is anticipated that Jean-François Dehecq and Hervé Guérin will be proposed as Chairman and Chief Executive Officer and Vice-Chairman and Chief Operating Officer respectively of the new company and both will also join the board.

Completion of the operation will be subject to regulatory approval and to the approval of the shareholders at Sanofi's and Synthélabo's extraordinary general meetings to be held in early May. Elf Aquitaine and L'Oréal have committed themselves to vote in favor of the merger. Appropriate procedures in respect to organizations representing personnel will be carried out.

The French stock market authorities have reviewed the project and, subject to its completion, have exempted Elf Aquitaine and L'Oréal from the obligation of making a public offer for the new group.

Philippe Jaffré, Chairman and CEO of Elf Aquitaine, said, "This operation represents the decision taken by Elf Aquitaine Board of Directors in December 1996, regarding its strategy to accelerate Sanofi's development and increase its profitability. Since that time, we have worked with Sanofi's management in order to find the best partner. This merger with L'Oréal is an excellent outcome which gives birth to a pharmaceutical company with enormous development prospects. It creates value for all shareholders, and for Elf Aquitaine's shareholders, through our interest in Sanofi-Synthélabo."

Lindsay Owen-Jones, Chairman and CEO of L'Oréal, made the following comment. "The two companies, whose strategic businesses are the same, have a perfect complementarity in terms of their product portfolio, research and development projects and geographical presence. The quality of their respective research, their strong positions on European markets, a particularly healthy financial situation and a stable shareholding base constitute a solid platform for becoming one of the foremost players worldwide in the pharmaceuticals industry. We are convinced that this new group will enable us to enhance the value of our interests in this sector."