What Will Happen to Aventis?

The recent takeover battle for French drug-maker, Aventis SA (AVE), betrays the existence of nationalism in France and resistance to the forces uniting Europe into a single marketplace.

Aventis has been trying simultaneously to fend off a hostile takeover bid from French rival, Sanofi-Synthelabo SA (SNY) and court Swiss drug giant, Novartis AG (NVS). The problem is that France has warned Novartis to back off, citing national interest as a reason to encourage an Aventis-Sanofi merger. More specifically, France has argued that Aventis's vaccines are crucial to France's defense against bioterrorism -- an argument that most investors do not take seriously.

On Thursday, Novartis, defying the Chirac government, entered formally into talks with Aventis which has courted Novartis as a "white knight." A Novartis-Aventis merger would create the second-largest drug company in the world behind Pfizer (PFE). Novartis entered talks after EU officials and Germany put pressure on France to avoid protectionism (Aventis has significant operations in Germany and was itself created from the merger of French and German companies).

At least in this instance, the protectionist nation-state is apparently alive in France.

Update 4/25/ 2004, 9:30PM -- Looks like French nationalists got what they wanted.