P&G

• Outsource R&D, manufacturing, regulatory, safety, QA
• Focus on marketing core competencies
• Reduce internal R&D & SG&A; increase margins
• Provide marketing, consumer research, sales to Teva
• Gain indirect access to the store brand channel in the US
• Gain cost effective overseas manufacturing access
• Use Teva QA, regulatory & distribution to access regulated ex-US markets
• Reduce manufacturing footprint
• Focus resources on non-health/beauty >$1 billion dollar global brands
• Exploit global whitespace

Marketing & Distribution key to OTC Allegra

Just how strategic is it?

• This deal is highly accretive to Sanofi given the favorably high gross margins (70%) of Chattem and its strong free cash flow.
• At a 35% premium to yesterday's stock price and a ratio of about 3 times sales and 13 times EBITDA Chattem received a robust price for its assets.
• Sanofi's interest in this deal must be its singular focus on moving Allegra into the US market via a strong marketing partner.
• The deal is reminiscent of the 1985 acquisition of Richardson-Vicks by P&G. P&G inherited the emergent Pantene and Olay brands that they later expanded into billion-dollar global megabrands.
• The strategic motivation for both the 1985 P&G/RVI and Sanofi/Chattem 2009 deal was to buy working access to non-domestic OTC sales and distribution channels.
• P&G abandoned the acquired managers of its newly acquired healthcare subsidiaries over time [Norwich Eaton, Richardson-Vicks, Noxzema, Gillette] despite retention incentives.
• After a transition period, and given past deals of this kind, Chattem's seasoned management team is likely to be replaced over time.
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