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News of the potential Solvay sale has sent the company's stock soaring, but is it good news for Belgium? Reflector reports.
The news that Solvay's pharmaceutical activities are up for sale hardly sent shockwaves around the world. Against the background of recent takeovers and mergers, it is indeed small beer. When Pfizer is buying Wyeth and Merck is swallowing Schering-Plough, it is unsurprising that AstraZeneca's David Brennan referred to Solvay as one of the "smaller companies that appear to be coming up for sale in Europe."
But in a way, the sell-off of what likes to call itself Belgium's last multinational in the sector tells a story bigger than the company itself.
Solvay is and always has been quintessentially Belgian. Its list of directors and principal shareholders reads like a Belgian Who's Who. New board members include senior executives from Belgium's stockbroking community, re-elected directors include figures like the former Belgian member of the European Commission, Karel Van Miert. Nearly a third of the shares are still owned by the Solvay family.
Of course the sale makes sense in many ways. News of the plan sent the company's share soaring, despite the difficult climate. And the synergies and economies of scale from bringing its activities into the framework of a larger and 'more multinational' multinational AstraZeneca, Sanofi-aventis and Takeda are among the current favourites for the acquisition are obvious.
However, it confirms yet again a trend that has gathered pace relentlessly across Europe over the last two decades. Traditional medium-sized national companies have largely disappeared, and now even the smaller self-styled multinationals are disappearing too. Alongside the compelling economic logic that drives this process, there is a more disturbing geographical dimension. As concentration in the sector takes its relentless course, more and more countries are losing the last vestiges of significant pharmaceutical activity in national ownership. This will have its effect on the operations of the industry Europe-wide.
Europe's north–south divide
The north-south divide in Europe has for decades pitted countries with strong pharmaceutical companies against those with weaker sectors (a divide mirrored in regulatory terms too). On matters of pricing and reimbursement, the countries with major pharmaceutical firms in national ownership have consistently been the more generous on the natural basis that it made sense to support a sector where they were strong. The 'southern' countries, consistently more restrictive, have been open to persuasion about more generous treatment insofar as they had a stake in the future of the industry. As the number of countries with a vigorous industry decreases, so too does the scope for convincing these 'southern' countries of the merits of pricing and reimbursement systems that nourish a healthy sector (and in this respect, Belgium must count as a southern country).
It is unfashionable in the heart of Europe where so much attention is devoted to building an ever more-integrated continent to focus unduly on national geographic considerations. But here in the heart of Europe, one small national heart is about to stop beating and the consequences of these minor losses will ultimately be felt throughout the body politic of the pharmaceutical industry.