Sanofi and Boehringer Ingelheim have entered into exclusive negotiations to swap businesses.

The proposed transaction would consist of an exchange of Sanofi’s animal health business Merial, which has an enterprise value of €11.4 billion ($12.5 billion), and Boehringer Ingelheim’s consumer healthcare (CHC) business, which has an enterprise value of €6.7 billion ($7.3 billion). Boehringer Ingelheim’s CHC business in China would be excluded from the transaction. The transaction also would include a gross cash payment from Boehringer Ingelheim to Sanofi of €4.7 billion ($5.1 billion).

Germany would become a key center of Sanofi CHC business, including in particular for gastro-intestinal and cough and cold categories that will benefit from the strong capabilities of Boehringer Ingelheim teams. Sanofi will pay particular attention to social matters as well as skills and people retention sensitivities.

Lyon would be a key operational center of Boehringer Ingelheim’s Animal Health business. Boehringer Ingelheim will commit to maintain business operations, R&D and manufacturing centers in France. As the U.S. market is an important part of Merial’s business, Boehringer Ingelheim would pay particular attention to sustain the momentum of the U.S. operations. Boehringer Ingelheim will give particular attention to social matters as well as skills and retention sensitivities.

Sanofi intends to use a portion of the net proceeds of the transaction to repurchase shares. Taking into account the anticipated CHC results, share buybacks and potential synergies, the overall transaction is expected to be business EPS neutral in 2017 and accretive in subsequent years.