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Merger meddling may leave French companies exposed

Have French efforts to create a national champion in the pharmaceuticals industry left its companies more vulnerable to hostile takeovers?

One of Europe's most contentious takeover battles in years was finally brought to a close last month when a beleaguered Aventis, under intense pressure from the French government, accepted a sweetened $63 billion takeover bid from rival French pharmaceutical company Sanofi-Synthélabo.

The combined company, to be called Sanofi-Aventis, will be the third-largest pharmaceutical company in the world behind US company Pfizer and GlaxoSmithKline of the UK.

The deal will create a single French powerhouse with dominant market shares in cancer, allergy and anti-stroke drugs.

But according to French lawyers, the government?s heavy-handed tactics in pushing the merger through could have a decidedly unhealthy effect on the French mergers and acquisitions market, potentially chilling foreign investment into the region while at the same time leaving French companies more vulnerable to raiders.

Specifically, French companies may find that their defences are sharply limited in trying to fend off hostile takeover attempts, after stock market regulator Authorité des Marchés Financiers (AMF) rejected Aventis?s poison pill plan to issue warrants tied to the patent protection of one of Sanofi's best-selling drugs.

?The AMF ruling could be a big step backwards for the French market,? says Eric Cafritz, a partner at the Paris office of law firm Fried Frank Harris Shriver & Jacobson.

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