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Sanofi Price Range for Genzyme as High as $80-a-Share

Sanofi Price Range for Genzyme as High as $80-a-Share
The Genzyme Corp. Science Center in Framingham, Massachusetts. Photographer: Michael Springer/Bloomberg

Sanofi-Aventis SA Chief Executive Chris Viehbacher provided a possible price range of $69 to $80 a share to buy Genzyme Corp. at a Sept. 20 meeting with the U.S. company’s chief, Genzyme said.

Henri Termeer, the Genzyme CEO, declined to agree to the range, Cambridge, Massachusetts-based Genzyme said in a regulatory filing yesterday. Sanofi today denied making such a proposal. “We offered no price range and Genzyme continued to refuse to engage with us on valuation,” Sanofi spokesman Jean-Marc Podvin said by telephone today.

Sanofi’s existing bid of $18.5 billion, or $69 a share, is “inadequate and opportunistic,” Genzyme said yesterday, urging shareholders to reject the hostile tender offer.

Since Paris-based Sanofi made its bid public on Aug. 29, Genzyme has closed each day higher than $69, indicating investors are betting the offer will rise. When the two CEOs met, Viehbacher said the price range he was proposing was “manageable but that, based on his current understanding, he could not get to $80 a share,” according to the filing.

“We strongly disagree with Genzyme’s characterization of the Sept. 20 meeting between our CEOs,” Sanofi’s Podvin said today. “At that meeting we made a variety of efforts to move the process forward, including discussing the merits of our $69-per-share offer and trying to understand if media reports about Genzyme’s price expectations were accurate.”

Shares Rise

Genzyme, the largest maker of medicines for rare genetic disorders, rose 64 cents to $73 in extended Nasdaq Stock Market trading yesterday. The stock had dropped as much as 43 percent from a 2008 high of $83.25 after contamination at a Boston plant caused drug shortages that eroded sales. Sanofi fell 13 cents, or 0.3 percent, to 48.92 euros at 11:40 a.m. in Paris today.

“The mere mention of $80 should be enough to hearten Genzyme shareholders,” said Les Funtleyder, a Miller Tabak & Co. analyst in New York, in a telephone interview yesterday.

Genzyme’s board cleared its advisers to contact third parties to “evaluate alternatives for the company and its assets,” the filing said. The company hasn’t yet reached out to potential suitors, spokesman Bo Piela said in a telephone interview yesterday. Piela declined to say whether Genzyme might begin an auction to sell itself.

During the Sept. 20 meeting, Viehbacher asked Termeer to “provide a price range at which a deal could be consummated, and proposed that the parties agree to a price range of from $69 per share to $80 per share,” the filing said.

‘Inappropriate Price’

Termeer “declined to agree” and “reiterated the company board’s unanimous view that $69 per share was an inappropriate price at which to commence negotiations.”

Viehbacher said Oct. 4 he would be willing to raise his offer if Genzyme provided details to justify a boost. Termeer asked for a higher bid when the two men met Sept. 20, though he didn’t specify a price, Viehbacher said in interview with Bloomberg Television.

“I’m not going to bid against myself,” Viehbacher said Oct. 4. “We’ve put a compelling offer on the table. I’m not prepared to increase the price unless someone really adds something concrete in terms of information.” Sanofi’s tender offer expires Dec. 10.

Termeer said in an Aug. 31 interview that he was open to selling the biotechnology company at a “fair value,” higher than Sanofi’s offer.

“Every company is for sale at some price,” Termeer said that day. “The company is not for sale at $69 and we made that clear.”

New Medicines

Genzyme said it will introduce three medicines by the end of 2013 that aren’t valued by Sanofi’s offer, according to yesterday’s filing. The company will seek an added approval of its blood-cancer drug Campath as a remedy for multiple sclerosis. Genzyme also anticipates clearance of mipomersen to treat high cholesterol and the pill eliglustat for Gaucher disease.

The new drugs are likely to help Genzyme lure at least one bidder to rival Sanofi and push the final sale price to as much as $78 a share, said Michael Yee, an RBC Capital Markets analyst based in San Francisco. Combined, the treatments may reap annual revenue of more than $1.5 billion, Yee said.

“What happens here is the bid goes higher and Genzyme is likely to extract more value,” Yee said in a telephone interview yesterday. “During my conversations with investors, that high-to-mid-70s range is where things start to get compelling.”

Possible Bidders

Large drugmakers led by Pfizer Inc. of New York and New Brunswick, New Jersey-based Johnson & Johnson may emerge as a rival bidders for Genzyme, Yee said.

J&J spokesman Jeffrey Leebaw declined to comment in an e-mail yesterday. Pfizer spokesman Ray Kerins didn’t immediately return a call for comment after regular business hours.

The deal would be the biggest hostile takeover in the drug industry since the $64 billion transaction that created Sanofi-Aventis in 2004, according to Bloomberg data. Sanofi has announced 35 acquisitions in the past five years, with an average size of $1.6 billion and an average premium of 15 percent, according to data compiled by Bloomberg.

“Typically the first bid is not the best and final bid,” Phil Nadeau, an analyst with Cowen & Co. in New York, said in an Oct. 5 telephone interview. “It’s normal for the shares to trade above the first hostile bid.”

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