Sanofi-aventis acquires controlling stake in Shantha

Sanofi-aventis will acquire a controlling interest in Hyderabad-based vaccine company Shantha Biotechnics at a price which values the Indian company at €550 million ($784 million).

Sanofi Pasteur, the vaccines division of Sanofi-aventis, has signed an agreement with Merieux Alliance to buy Merieux's subsidiary ShanH, which in turn owns around an 80% stake in Shantha.

Shantha, which is not listed, is expected to have revenues of $90 million for the current fiscal year, and based on that, the agreed price translates into a firm value-to-sales multiple of 8.7 times. Sanofi-aventis is paying for the growth potential of Shantha, which has seen its sales multiply by 13 times from a revenue of Rs324 million ($6.7 million) in 2000.

Sanofi-aventis said in a written statement that it expects to grow Shantha's sales significantly "given the commercial resources of Sanofi Pasteur and through the development and launch of Shantha's pipeline of new vaccines". New products in development at Shantha include vaccines for rotavirus (the leading cause of severe diarrhoea among infants and young children), typhoid and HPV (human papillomavirus which affects the epidermis and mucous membranes).

"Shantha provides Sanofi Pasteur with a portfolio of new vaccines in development which complement Sanofi Pasteur's current vaccines, positioning the company to accelerate its growth in strategically important emerging markets," Christopher Viehbacher, chief executive officer of Sanofi-aventis, said in a written statement.

The agreement between the parties envisages that Varaprasad Reddy will continue to be in charge of Shantha as managing director. 

Reddy founded Shantha in 1993 to develop cost-effective vaccines and therapeutics. In 1995 H.E Yusuf Bin Alawi Abdullah, the foreign minister of the Sultanate of Oman, along with some of his associates, showed an interest in Reddy's vision. A consortium of Omani investors bought a 60% stake in Shantha and helped the company arrange debt financing.

On the back of this funding, Shantha developed India's first hepatitis-B vaccine in 1997 and has launched a number of other products since.

In 2006 Lyon-based Merieux Alliance acquired the 60% stake of the Omani investors in Shantha and subsequently increased its ownership to around 80%. Financial details of these deals were not disclosed.

Merieux Alliance is the family holding company of Alain Merieux who himself joined the Shantha board in 2006. Merieux will continue to be involved in Shantha as chairman of a new strategic committee on vaccine strategy for emerging markets, and chairman of the board of ShanH.

Merieux Alliance has been seeking to cash out of its investment in Shantha. Earlier this year media had reported that Glaxo SmithKline was likely to pip Sanofi-aventis to the post.