France's Sanofi SA to buy US-based Principia Biopharma for $3.7 billion

Sanofi SA is set to buy US-based Principia Biopharma Inc for around $3.7 billion, the companies announced on Monday, marking the French drugmaker's latest acquisition in the US biotech sector.

The deal will strengthen Sanofi's research capabilities in areas such as autoimmune and allergic diseases, the companies said.

The merger also seals a record summer for European takeovers of US healthcare targets, coming just two weeks after Germany's Siemens Healthineers made a $16.4 billion swoop on US oncology firm Varian.

Sanofi is set to buy the outstanding shares of Principia for $100 per share in cash, representing an aggregate equity value of around $3.68 billion on a fully diluted basis and a premium of 10% to Principia Biopharma's closing price of $90.74 on Aug. 14.

"This acquisition advances our ongoing R&D transformation to accelerate the development of the most promising medicines that will address significant patient needs," said Sanofi Chief Executive Paul Hudson.

Sanofi announced a new strategy last December and is shifting from a generalist pharmaceutical company to a leaner business centred around vaccines, rare diseases and oncology.

Its shares edged up 0.5% in mid-session trading, outpacing a slight rise in France's CAC-40 index, as analysts were positive on the Principia Biopharma deal.

"We like the relatively low risk value accretion of this deal with longer-term optionality, that fits within the strategy of deploying firepower across numerous bolt-on deals," wrote brokerage Jefferies, which kept a 'buy' rating on Sanofi.

Sanofi said it expected to complete the acquisition of the .. firm, which is developing treatments for multiple sclerosis among other projects, in the fourth quarter of 2020.

"The merger will provide global resources to get these novel therapies to patients faster," said Martin Babler, president and chief executive at Principia Biopharma.

Shares in Sanofi - which is also working on two Covid-19 vaccine projects, one of them with Britain's GlaxoSmithKline Plc - are down by around 5% since the start of 2020, whereas the CAC-40 has fallen around 17% this year.

The Principia Biopharma acquisition follows the French company's 2018 takeover of U.S. haemophilia treatment specialist Bioverativ for $11.6 billion, and its purchase of biotechnology company Synthorx in December 2019 for around $2.5 billion.

Sanofi earned $11.7 billion in May from selling shares in Regeneron and had been expected to deploy the proceeds on bolt-on acquisitions.

Evercore was the financial adviser for Sanofi while Weil, Gotschal & Manges provided legal advise. Centerview and Bank of America represented Principia, with Cooley as legal adviser.