European equities slipped yesterday afternoon as French drug maker Sanofi-Synthelabo came under fire after making a €48 billion hostile bid for rival Aventis, while Wall Street opened flat.
Aventis rejected the bid and rose 5.9 per cent. Expectations that the move could prove just the first step in a drawn-out takeover battle took 4.6 per cent off Sanofi's share price.
"This is a warning shot across the bows. This is not necessarily the final offer," said Marc Booty, pharmaceuticals analyst with Commerzbank in London.
Cosmetics giant L'Oreal, which owns 44 per cent of Sanofi with oil major Total, fell 2.7 per cent. It said it backed the bid, adding it would keep its Sanofi shares and stop consolidating Sanofi earnings in its own profit and loss account if the acquisition was completed.
Total also said it backed the bid. Its shares were little changed because Sanofi's contribution to the oil company's profits is less significant.
Talk of drug industry consolidation boosted Switzerland's Roche 2.7 per cent on hopes of a bid from domestic rival Novartis, which said last week it had raised its holding in Roche to 33.3 per cent.
Reports that Roche's Tamiflu drug would be sent to Vietnam to help fight the bird flu also bolstered the stock.
Germany's Schering, also seen as a potential bid target, climbed 1.9 per cent. Novartis eased 0.2 per cent.
By 1500 GMT, the FTSE Eurotop 300 index of pan-European blue chips, was down 0.2 per cent at 990.30 points, below the session high of 995.41.
The DJ Euro Stoxx 50 index was down 0.48 per cent to 2,878.69 points, down from a session high of 2892.42.
Strategists said European equities were looking toppy after their run up to 17-month highs of 999.17 last Thursday.
They said investors would be cautious ahead of a statement on interest rates and the US economy from the US Federal Reserve tomorrow and US economic growth data for the fourth-quarter on Friday.
"2003 was all about recovery. 2004 is about the transition to expansion," said Matthew Wickens, strategist at ABN AMRO.
"If the data starts to disappoint, people could decide to take a little more profit and go a little more defensive."
In New York, the blue-chip Dow Jones industrial average was little changed at 10,570.00 points and the technology-laden Nasdaq Composite Index was at 2,122.98.