Private equity suitors of Sanofi’s consumer health carveout are lining up debt financing packages that are likely to be among the largest-ever. Early talks are targeting nearly $8.2 billion of financing, per Bloomberg—just short of the $9 billion raised by Stone Point and Clayton Dubilier & Rice for their acquisition of Truist’s insurance unit earlier this year.
Advent International, Blackstone, Bain Capital, CVC Capital Partners, EQT, KKR, and Clayton Dubilier & Rice are all among potential bidders interested in the Sanofi asset, which is expected to fetch around $20 billion.
The potential deal may also signal a shift in preference back toward bank-led financings, at the expense of rival private credit offerings.
Last year, banks retreated from new deals as credit markets cooled. With a lack of willing purchasers for syndicated loans, banks found themselves saddled with financings they couldn’t get off their books.
Now, with a more active market and the general expectation that rates have peaked, banks are more confident they can successfully syndicate deals. Private equity investors will look forward to more robust lender processes. While direct lenders can provide greater flexibility, they often fall short on pricing when compared to cheaper bank-led syndications.
Consumer Exits
Late last year, Sanofi guided that the most likely outcome of its planned consumer divestiture would be through a separate public listing. Those plans are still progressing, with an offering expected late this year. The French drugmaker has, however, expressed openness to an outright sale if it finds an acquirer that will hit its desired valuation.
Sanofi’s consumer unit posted 2023 revenue of $5.6 billion, with flagship brands including Allegra, IcyHot and Aspercreme. The decision to offload the business mirrors similar moves made in recent years by Johnson & Johnson (spinning out Kenvue) and GSK (Haleon). Of the large pharmaceutical companies, only Bayer still maintains its consumer division.
The collective decision to move away from lower-margin consumer products is driven by shareholder pressure to focus solely on novel drug discovery and development—targeting blockbuster therapeutics that can move the needle for investors.
While consumer health businesses provide relatively stable performance and a source of cash, they also require a differentiated set of skills more focused on brand marketing, distribution, and manufacturing, not advanced drug discovery research.
A potential distraction for pharma, but an attractive target for private equity.