Sanofi May Make Hostile Bid If Genzyme Resists, Citigroup Says

Sanofi-Aventis SA may begin a hostile bid for Genzyme Corp. should the U.S. biotechnology company resist a takeover approach, analysts at Citigroup Inc. said.

No other bidder is likely to emerge for Cambridge, Massachusetts-based Genzyme, and Sanofi will probably succeed in acquiring the company for $74 to $77 a share, Citigroup analysts Mark Dainty and Yaron Werber wrote in a report to clients today. Genzyme is worth $70 a share based on estimated cash flow, and Sanofi would benefit from as much as $5.50 a share of synergies in an acquisition, they said.

Investors in Genzyme say Paris-based Sanofi may have to pay at least $80 a share, or $21.3 billion, to acquire the maker of drugs that fight genetic diseases. Sanofi Chief Executive Officer Chris Viehbacher has support from his board to offer as much as $70 a share, or about $18.7 billion, and is preparing a formal offer letter, three people familiar with the situation said last week.

“If Genzyme management are resistant or commanding an unfair price, it is possible that Sanofi will launch a direct tender offer to shareholders to bypass management and the board,” Dainty and Werber wrote.

A purchase at $74 to $77 a share would add to Sanofi’s earnings, the analysts said. Viehbacher reiterated in a conference call with analysts last week that any acquisition would have to add to profit. Sanofi, France’s biggest drugmaker, has declined to comment on Genzyme. Reached today, Jean-Marc Podvin, a company spokesman, again declined to comment.

Photographer: Tim Boyle/Bloomberg

Chris Viehbacher, chief executive officer of Sanofi-Aventis SA, reacts during an interview. Close

Chris Viehbacher, chief executive officer of Sanofi-Aventis SA, reacts during an interview.

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Photographer: Tim Boyle/Bloomberg

Chris Viehbacher, chief executive officer of Sanofi-Aventis SA, reacts during an interview.

Genzyme Cut Back Defenses

Genzyme shares rose 80 cents, or 1.2 percent, to $70.36 at 4 p.m. New York time in Nasdaq Stock Market trading. Werber, who’s based in New York, cut his rating on Genzyme to “hold” from “buy” and raised his price forecast for the stock to $76 from $64. Dainty, who works in London, reiterated his “buy” rating on Sanofi.

“While we think a deal is likely, we see likely deal price at mid/high $70s, and so we are advocating taking some profits off the table in case a deal falls through,” the analysts wrote.

Sanofi may make a formal offer to Genzyme within weeks at $68 to $70 a share, and Genzyme may ask in return for $80 or more, according to Dainty and Werber. Should an agreement not be reached, investors would welcome a hostile bid even at less than $80 a share, they wrote.

Genzyme, under pressure from investors, has cut back its defenses against a hostile takeover in recent years, the analysts said. The company’s entire board is up for election annually, and in June shareholders reduced the threshold required to call a special meeting to 40 percent of shares from 90 percent.

“The company is more susceptible to a hostile bid and the board more exposed to shareholder pressure than is typical for U.S. companies,” the analysts wrote.

Sanofi rose 84 cents, or 1.9 percent, to 45.41 euros in Paris trading.

To contact the reporter on this story: Phil Serafino in Paris at pserafino@bloomberg.net

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