In our ongoing coverage of a potential deal for Solvay’s pharma biz, analysts are now mixed on the sale and strength of the pipeline. What was rumored to be worth $6B or so, the unit is now being touted as lacking a deep pipeline.

The Guardian is saying that Solvay shareholders may have “a long wait” before any deal is done because the Solvay family, which owns 30% of the company, is known for taking a long-term approach. Analysts are already speculating that the small size of the business and its low profit margin may deter buyers despite Citigroup, Morgan Stanley and Rothschild assisting with the sale.

Adding to the waiting game, Solvac, which holds the Solvay family’s 30 percent stake, is unlikely to be in any rush and has not yet taken a stance over the sale.

So what does that mean? Is the deal futile? If Solvac hasn’t taken a stance why would Solvay even consider going through all the trouble??? Why all the curve balls???

ING analyst Jan Hein de Vroe said:

“Solvac will likely need to give the go-ahead for any deal…it will also require a stiff premium for it to relinquish control.”

Ouch. Looks like reality is going to hit hard when you dig into the pipeline and take a look up at the stock screen. Yeah, the economy is in the toilet and no one is paying a premium for a business w/o a deep pipeline. Sorry.

De Vroe also went on to say this about the unit’s low recurring earnings:

“This is largely a reflection of the lack of scale, a portfolio of drugs with small addressable markets and some generic products…an imminent sale of the division is not as clear cut as the share price reflects.”

To us, this means no one really knows what’s going to happen because it’s up to Solvac and the Solvay family. In our experience, whenever a family owns a business (kind of like a scientist trying to develop a drug him/herself), emotion often overpowers objectivity and it becomes difficult to give up the reigns to your baby. More often than not, the project or business stays with the owner and optimal business potential is never reached.

But, that’s just what we think. Thoughts??

Image from purdue

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