Sanofi Chief Extends Hand to Bypass Genzyme `Brick Wall'
Genzyme CEO Henri Termeer
Pankaj Nangia/Bloomberg
Genzyme Chief Executive Officer Henri Termeer.
Genzyme Chief Executive Officer Henri Termeer. Photographer: Pankaj Nangia/Bloomberg
Sanofi-Aventis CEO Chris Viehbacher
Nelson Ching/Bloomberg
Sanofi-Aventis Chief Executive Officer Chris Viehbacher.
Sanofi-Aventis Chief Executive Officer Chris Viehbacher. Photographer: Nelson Ching/Bloomberg
Sanofi-Aventis SA Chief Executive Officer Chris Viehbacher has signaled he may raise his $18.5 billion cash bid for Genzyme Corp., if Genzyme’s management would come to the negotiating table.
Viehbacher, in a conference call today, said his offer of $69 a share is “a realistic starting price.” His counterpart at Genzyme, Henri A. Termeer, called the price “unrealistic” in a statement from the U.S. company earlier in the day.
The two CEOs today publicly aired what had been a private, two-month long takeover attempt. Termeer said the Sanofi offer undervalued Genzyme’s pipeline and efforts to fix manufacturing contamination. Viehbacher reiterated that Sanofi would consider other actions if Genzyme won’t negotiate. A hostile bid could force Sanofi to pay $75-a-share, one analyst said yesterday.
“At the moment, we have essentially encountered a brick wall,” Viehbacher said today on the call. Sanofi wants “a meeting of reasonable minds to actually sit down together and discuss what the options are.”
Shares of Genzyme, based in Cambridge, Massachusetts, rose 3.4 percent, or $2.29, to $69.91 at 4:09 p.m. in Nasdaq Stock Market composite trading. Sanofi shares rose 30 cents to 45.56 euros at the close of trading in Paris.
$75 Price
Mark Schoenebaum, an analyst with ISI Group Inc., said a decision by Sanofi to go hostile would raise the price. “I don’t believe a price under $75 will get it done,” he said in a telephone interview yesterday.
Sanofi is bidding for Genzyme, the world’s largest maker of medicines for genetic diseases, as products generating about 20 percent of its revenue face generic rivals by 2013. Genzyme’s products are less likely to face generic competitors because they’re made from living cells and are harder to copy than traditional pills made from chemical compounds.
Yesterday’s letter from Sanofi is identical to an earlier offer that was rejected, Termeer said in his statement today. He said it provides no reason for Genyzme to engage in negotiations at this time.
“Without exception, each member of the Genzyme board believes this is not the right time to sell the company,” Termeer said in his letter to Sanofi. “Your opportunistic takeover proposal does not begin to recognize the significant progress under way to rectify our manufacturing challenges or the potential for our new-product pipeline.”
Board Meeting
Termeer’s letter said the board, which includes representatives of shareholders Relational Investors and billionaire Carl Icahn, met yesterday evening to discuss the Sanofi offer.
Genzyme’s response was “unsurprising,” Viehbacher said on today’s call. Sanofi said it’s not prepared to go to “any length” to buy Genzyme and sees the possibility of another bidder as “limited.” A statement by Sanofi yesterday that the company would “consider all alternatives” to complete a deal was reiterated by Viehbacher in today’s call.
That statement prompted speculation from analysts that the Sanofi bid could turn hostile if Genzyme wouldn’t negotiate.
“It could mean they may go hostile,” Mark Schoenebaum, an analyst with ISI Group Inc., said yesterday in a telephone interview. If the company goes that route “I don’t believe a price under $75 will get it done,” he said.
Plant Contamination
Genzyme estimated in a regulatory filing it may take three to four years to complete changes requested by U.S. regulators after a plant contamination. Genzyme has until the end of the year to submit its manufacturing remediation plan to the U.S. Food and Drug Administration, and the agency generally responds within 30 days.
Termeer’s letter cited last week’s announcements that it was increasing supply of the drug Cerezyme for Gaucher disease patients to near-normal levels and that supplies of Fabrazyme for patients with Fabry disease will increase beginning in the fourth quarter. It also noted “the tremendous future upside” for its experimental multiple sclerosis drug.
The offer represents a 38 percent premium over Genzyme’s “unaffected” price -- meant to strip out a stock gain linked to expectations of a bid -- 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 U.S.
Sanofi Chief Financial Officer Jerome Contamine said on the conference call that the company has financing for the transaction from JPMorgan Chase & Co., BNP Paribas SA and Societe Generale SA. Evercore Partners Inc. and JPMorgan are its lead financial advisers, according to the statement.
Weil, Gotshal & Manges LLP is acting as legal counsel, the company said. Viehbacher declined to comment on details of the financing.
To contact the reporters for this story: Albertina Torsoli at atorsoli@bloomberg.net; Meg Tirrell in New York at mtirrell@bloomberg.net
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