Sanofi plans hostile bid for Genzyme

Written by Bloomberg | Updated: Sep 1 2010, 04:41am hrs
Sanofi-Aventis SA opened the door to a hostile bid for Genzyme Corp after going public with an $18.5-billion cash offer for the US biotechnology company and saying it would consider all alternatives to complete a deal.

The Paris-based company offered $69 a share in a letter to Genzyme chief executive officer Henri A Termeer, repeating a proposal made on July 29, Sanofi CEO Chris Viehbacher said on Sunday. Frances largest drugmaker said its making the bid public after several unsuccessful attempts to engage Genzymes management in discussions.

Sanofi is bidding for Genzyme, the worlds largest maker of medicines for genetic diseases, as products generating about 20% of its revenue face generic rivals by 2013. Viehbacher on Sunday said his goal is to negotiate an agreement to buy Genzyme. Acquiring Genzyme would add to Sanofi earnings and fit with the companys strategy, he said. There is no assurance an agreement can be reached between the firms, Sanofi said.

Now is the right time for Genzyme to consider a transaction that maximises value for its shareholders, Viehbacher said. We remain focused on entering into constructive discussions with Genzyme in order to complete this transaction. Bo Piela, a spokesman for Genzyme, declined to comment.

It could mean they may go hostile, Mark Schoenebaum, an analyst with ISI Group, said in an interview on Sunday. Basically theyre just going to bypass the board and go straight to shareholders. Genzyme, based in Cambridge, Massachusetts, rose 78 cents to $67.62 on Aug. 27 in Nasdaq Stock Market composite trading. Sanofi declined 11 cents, or 0.2%, to 45.15 euros as of 9:31 a.m. in Paris trading on Monday. The offer represents a 38% premium over Genzymes unaffected share price of $49.86 on July 1, Viehbacher said. On July 2, Bloomberg reported Sanofi had briefed its board of directors on plans for an acquisition of about $20 billion in the US.

The bid is a 31% premium to the one-month historical average price through July 22, the day before press reports that Sanofi was pursuing Genzyme. This values the US company at 36 times its 2010 earnings per share and 20 times its 2011 earnings per share, according to analyst estimates, Sanofi said in a statement on Sunday. Sanofis board supports an offer of up to $70 a share and was unwilling to raise its price at this stage, three people with knowledge of the matter said last week. They asked not to be identified as the talks are private. The French drugmaker will remain extremely disciplined on acquisitions, Viehbacher told reporters on Sunday.

The offer values Genzyme at about 35 times the $1.96 2010 earnings per share average of analysts surveyed by Bloomberg. Because the value of even some large biotech companies lies in drugs that havent produced sales or earnings yet, earnings multiples in such acquisitions varied widely.

We have an extremely compelling offer on the table, Viehbacher said during the conference call. Beyond that its difficult to speculate on the next course of action, he said, adding that Sanofi will take one step at a time.