French govt takes new blows over deal to sell painkiller maker to US fund

The French government is facing intense scrutiny and public outcry as it confirms plans to sell a controlling stake in its consumer health unit, Opella, to a US investment fund, Clayton Dubilier & Rice (CD&R). This deal, valued at approximately €16 billion, has ignited fierce debate over job security, sovereignty, and the strategic importance of France's pharmaceutical industry. Here, we delve into the details of this contentious transaction and the reactions it has elicited from both the public and politicians.

The Deal: A Complex Web of Interests

Sanofi, one of France's leading pharmaceutical companies, has announced that it will part with a 50% controlling stake in Opella, its consumer health division. This move is part of Sanofi's broader strategy to focus more on innovative medicines and vaccines, rather than over-the-counter products. The American private equity firm CD&R will take the majority stake, but not without facing significant conditions imposed by the French government.

Government Intervention

To assuage concerns over job security and maintain control over a strategic sector, the French government has secured a 2% stake in Opella through Bpifrance, the state-owned investment bank. This move is seen as an effort to protect French jobs and ensure that the company's headquarters, research and development activities, and manufacturing sites remain in France. The government has also imposed strict conditions: Opella must maintain a minimum production volume for sensitive products in France, including Doliprane, the country's best-selling paracetamol brand.

Public Reaction

The announcement has sparked widespread anger and protests across France. Labor unions have called for strikes to protest the deal, fearing job losses and potential offshoring of operations. Criticisms from politicians have been equally vocal. Manuel Bompard, a senior lawmaker from the hard-left France Unbowed (LFI) party, has called on the government to block the sale using its powers to protect strategic sectors.

Economic Implications

Opella is not just any ordinary pharmaceutical company; it is the manufacturer of Doliprane, which has been a staple in French pharmacies for decades. The drug's ubiquitous presence in French medicine cabinets has made it an iconic brand synonymous with paracetamol. However, memories of drug shortages during the COVID-19 pandemic have left a lasting impact, making public concerns over supply chain security particularly acute.

Political Backlash

Prime Minister Michel Barnier's minority government has come under intense scrutiny over its handling of the deal. Critics argue that the 2% stake held by Bpifrance is insufficient to provide meaningful oversight or ensure long-term commitments to employment and investment. Even some within the government camp have expressed skepticism about the deal's guarantees. Charles Rodwell, a lawmaker from Macron's EPR party, has vowed "painstaking" parliamentary surveillance to ensure that the government's promises are upheld.

Historical Context: Selling Off Consumer Health Units

Sanofi's move to sell off its consumer health unit is not an isolated incident. Several major pharmaceutical companies have followed a similar strategy in recent years. Johnson & Johnson, for instance, split off its consumer division, Kenvue, creating a standalone company to house iconic brands like Tylenol and Benadryl. Novartis also sold off its generics and biosimilars unit Sandoz. This trend reflects a broader shift in the pharmaceutical industry towards focusing on research and development of new medicines and vaccines.

The Future of Opella: A French-Headquartered Giant?

Despite the controversy surrounding the sale, Sanofi remains committed to ensuring that Opella continues to operate as a French-headquartered company. CD&R, known for its investments in European companies like Rexel and Spie, has pledged to support Opella's growth as a global consumer healthcare champion. Sanofi's CEO, Paul Hudson, emphasized the firm's decision to remain vested in Opella's future, citing the company's deep roots in France and its commitment to consumer expertise and global presence.

Employment and Investment Guarantees

The deal includes significant guarantees for maintaining employment levels and investment in France. Opella must invest at least €70 million in the country over the next five years, and it faces financial penalties for any economic-related layoffs or offshoring of operations. These measures aim to alleviate public concerns about the potential negative impact on French jobs and the local economy.

Conclusion

The sale of Opella to CD&R represents a complex balancing act between economic interests and public scrutiny. While the French government has secured significant commitments from CD&R and Sanofi to protect jobs and maintain production in France, the deal remains contentious. As the debate continues, one thing is clear: the future of Opella and the broader French pharmaceutical industry hangs in the balance. The outcome will not only impact the livelihoods of thousands of employees but also shape the strategic direction of a critical sector in France.

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References:

• https://www.euronews.com/business/2024/10/21/france-takes-stake-in-sanofi-as-it-moves-ahead-with-cdr-deal
• https://www.biospace.com/business/sanofi-seals-deal-with-private-equity-firm-for-50-stake-in-consumer-healthcare-unit
• https://www.theguardian.com/business/2024/oct/21/france-to-take-stake-in-sanofi-unit-to-quell-backlash-over-sale-to-us-firm
• https://www.dailysabah.com/business/economy/deal-to-sell-sanofi-unit-to-us-fund-deals-new-blow-to-french-govt
• https://www.politico.eu/article/paris-paracetamol-american-fund-pharma-economy-france-takeover/