Sanofi May Need to Pay $77 a Share for Genzyme
Sanofi May Need to Pay $77 a Share for Genzyme
JB Reed/Bloomberg
Pills of Genzyme Corp.'s chronic kidney disease treatment Hecterol, right, and Sanofi-Aventis SA's insomnia medicine Ambien are arranged for a photo at New London Pharmacy in New York.
Pills of Genzyme Corp.'s chronic kidney disease treatment Hecterol, right, and Sanofi-Aventis SA's insomnia medicine Ambien are arranged for a photo at New London Pharmacy in New York. Photographer: JB Reed/Bloomberg
Sanofi-Aventis SA will probably need to raise its offer for Genzyme Corp. to between $74 and $77 a share to clinch a deal, Citigroup Inc. analysts said.
The French drugmaker yesterday indicated it may raise its $69-a-share cash bid if Genzyme’s management would come to the negotiating table, a day after making its month-old offer public.
“$69 is a good place to start negotiations,” the Citigroup analysts, led by Mark Dainty, wrote in a note to clients. “We expect a deal at $74-$77.”
Chief Executive Officer Chris Viehbacher yesterday left the door open to a higher bid, even as he emphasized Paris-based Sanofi’s caution on price. His counterpart at Genzyme,Henri A. Termeer, has refused to sit down to negotiate, saying the “unrealistic” $18.5 billion offer undervalues Genzyme’s pipeline and efforts to fix manufacturing contamination.
“We’re going to be disciplined and disciplined means that we have a value in mind and I’m certainly not prepared to go at any length to acquire the company,” Viehbacher said on a conference call yesterday. “I’m very respectful of the fact that we are spending shareholder money.”
Viehbacher also said his priority was to sit down with Genzyme’s management and “discuss what the options are.”
Fitch Ratings lowered its outlook on Sanofi’s financial strength ratings today, saying the change “reflects the moderate risk of a materially higher-than-expected final acquisition price.”
Shares of Genzyme, based in Cambridge, Massachusetts, rose above $70 yesterday before ending the day at $69.91 in Nasdaq Stock Market composite trading.
Go Hostile or Quit
The Citigroup analysts said the two more likely scenarios now are for Sanofi to make a hostile offer or walk away, in which case Genzyme shares would likely fall to between $50 and $55. The analysts expect “limited other bidders” for Genzyme.
Sanofi fell 0.6 percent, or 29 cents, to 45.27 euros at the close of Paris trading. The Genzyme 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 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.
Viehbacher indicated Sanofi hadn’t been able to conduct due diligence on Genzyme’s books so far and would need to do “some of that” before being willing to consider raising its price. The French drugmaker has, for now, “essentially encountered a brick wall,” Viehbacher told analysts and investors yesterday.
To contact the reporters for this story: Albertina Torsoli at atorsoli@bloomberg.net;
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