Genzyme Said to Rebuff Sanofi-Aventis Takeover Approach
Genzyme can command at least $22 billion, or $80 a share, on the potential for revenue to surge after the company resolves manufacturing defects depressing sales of existing products and introduces new medicines, investors and analysts said today. That is a 48 percent premium over Genzyme’s closing price on July 22, the day before reports of Sanofi’s interest.
Sanofi may send a formal letter to Genzyme detailing its interest in an acquisition as soon as this week, said a person with knowledge of the French drugmaker’s plan who declined to be identified because the process is confidential. Genzyme’s revenue, $4.5 billion last year, can surge 47 percent to about $6.6 billion by 2013, said Geoff Porges, an analyst with Sanford C. Bernstein & Co. Investors will insist on at least $20 billion in a sale, said Sven Borho, with OrbiMed Advisors, holder of 2.5 million Genzyme shares.
“If two or three companies get involved in bidding, the $80s are achieved really easily,” Borho said in an interview today. “There are so few good assets out there, and this is one of the more promising assets.”
Genzyme Shares Surge
Genzyme, of Cambridge, Massachusetts, rose 7.8 percent, or $4.86, to $67.38 at 4 p.m. in Nasdaq Stock Market composite trading, following a 15 percent increase July 23, after reports that Paris-based Sanofi had made an overture.
London-based GlaxoSmithKline Plc recently made a “very casual” overture to Genzyme, asking the biotechnology company to keep it in mind if Genzyme considered selling itself, the Wall Street Journal reported today, without naming the source. Alex Harrison, a Glaxo spokeswoman, declined to comment. Sanofi doesn’t expect competing bids, said the person with knowledge of the French drugmaker’s plan.
Sanofi Chief Executive Officer Chris Viehbacher is counting on acquisitions to help replace revenue the company is losing as its medicines face competition from lower-priced generic drugs. Sanofi has spent about $17 billion on 25 acquisitions since Viehbacher joined the company in 2008, according to data compiled by Bloomberg.
Genzyme Chief Executive Officer Henri Termeer said in a June 14 interview that the company wasn’t for sale. The company 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.
Genzyme has said it will spin off three business units. Sanofi may have reviewed those businesses and decided to buy the whole company and restructure it, Porges said.
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, he said. Whitworth declined to comment and Icahn didn’t return a call for comment.
“We would not expect full support for the deal until the price offered reached the $75 to $85 range,” Porges, based in New York, said in a research report.
It would be surprising if a buyer expected to pay a premium of less than 25 percent to 30 percent for Genzyme, said Phil Nadeau, an analyst with Cowen & Co. in New York, in a July 23 report.
“Given that Genzyme has activists on its board, frustrated shareholders, and a management team generally perceived to be on thin ice, it would be hard for Genzyme to turn down,” Nadeau said.
BNP Paribas SA and JPMorgan Chase & Co. are among the banks that have agreed to provide financing for a possible acquisition of Genzyme Corp. by Sanofi-Aventis SA, said two people with knowledge of the plans.