Sanofi Board Said to Support Genzyme Bid of Up to $18.7 Billion
Stock Chart for Genzyme Corp (GENZ)
Sanofi-Aventis SA Chief Executive Officer Chris Viehbacher has support from his board of directors to offer as much as $70 a share for Genzyme Corp., or about $18.7 billion, said three people with knowledge of the situation.
France’s largest drugmaker is preparing a formal approach, and plans to send a letter to Genzyme in the coming days that will detail its interest and give a specific price, said the people, who spoke on condition of anonymity because the talks are private. The Paris-based company may offer less than $70 a share in the letter, two of the people said.
Viehbacher is counting on takeovers to help replace revenue it will lose as its medicines face competition from lower-priced generic drugs. Sanofi cut its 2010 earnings forecast this month after U.S. regulators approved a generic rival to its Lovenox blood thinner. Genzyme, the world’s largest maker of medicines for genetic diseases, last week rebuffed an informal approach by Sanofi to enter talks, said people familiar with the situation.
“Seventy dollars is close, but probably doesn’t get it done,” said Phil Nadeau, an analyst with Cowen & Co. in New York, in a telephone interview. “My guess is that Genzyme would turn them down, do some negotiations, and the price would go up a little bit, maybe to $73 or $75.”
Viehbacher declined to comment on Cambridge, Massachusetts- based Genzyme today in conference calls with reporters and analysts.
Genzyme shares rose $2.03, or 2.9 percent, to $70.02 at 12:25 p.m. New York time in Nasdaq Stock Market trading. The stock has gained 31 percent since Sanofi’s interest in the company was first reported on July 23. Sanofi fell 61 cents, or 1.3 percent, to 44.82 euros at the 5:30 p.m. close of trading in Paris.
The 50-year-old chief executive, who announced a 7.6 percent increase in second-quarter earnings to 2.48 billion euros ($3.23 billion) today, said the company remains “opportunistic” on acquisitions and is looking for takeovers worth between $5 billion and $20 billion that will bolster earnings. Sanofi is “disciplined” about takeovers and rejects “mega-merger-type deals,” he said.
A Sanofi acquisition of Genzyme would be the biggest industry takeover since Merck & Co. bought Schering-Plough Corp. for about $47 billion in November 2009, according to Bloomberg data.
Struggle for Support
Sanofi will struggle to win full support from Genzyme’s board until an offer price reaches a range of $75 to $85 a share, said Geoff Porges, an analyst with Sanford C. Bernstein & Co. in New York, in a research report. Activist investors including billionaire Carl C. Icahn who controls two board seats, and Ralph Whitworth of Relational Investors, a Genzyme director, will likely push for a sale, according to Porges.
Viehbacher likely would need additional board approval to make an offer for Genzyme higher than $70 a share, according to the people.
Genzyme investors will insist on at least $20 billion, said Sven Borho, with OrbiMed Advisors, holder of 2.5 million Genzyme shares, on July 26.
At about $70 a share, Sanofi would be paying 36 times Genzyme’s 2010 earnings per share as forecast by analysts. Acquirers of biotechnology companies paid on average 38 times earnings in transactions announced over the past 12 months, according to Bloomberg data.
Genzyme CEO Henri Termeer said in a June 14 interview that the company wasn’t for sale. It is focused on fixing manufacturing defects that cut into sales of its biggest products, Termeer said. He is seeking to revive the drugmaker after sales slumped 2 percent to $4.5 billion last year, following a virus contamination at Genzyme’s Allston Landing factory in Boston.
Goldman Sachs Group Inc. and Credit Suisse Group AG are advising Genzyme on the pending offer, said several people familiar with the matter. JPMorgan Chase & Co. and BNP Paribas SA are among the banks that have agreed to provide Sanofi with financing for a possible bid, said these people.
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