Sanofi Says Genzyme Should Swear Off Defensive Steps

Genzyme Corp. should forgo defensive measures such as staggering the terms of its directors to allow shareholders to decide whether they want to accept an $18.5 billion hostile takeover offer from Sanofi-Aventis SA, Sanofi said.

Sanofi is encouraged that Genzyme decided to explore a possible sale, the Paris-based company said in a statement today. Still, Sanofi hasn’t been contacted by Cambridge, Massachusetts-based Genzyme or its bankers, according to the statement, which included a copy of a letter from Sanofi Chief Executive Officer Chris Viehbacher to his Genzyme counterpart, Henri Termeer.

The letter is an attempt by Sanofi to keep pressure on Genzyme, said Jerome Forneris, who helps manage $11 billion, including Sanofi shares, at Banque Martin Maurel in Marseilles. Genzyme, in an Oct. 7 regulatory filing, raised the prospect of staggering the board terms, thus preventing shareholders from voting out all the directors at once, initiating a “poison pill” that would make a takeover prohibitively expensive or using Massachusetts law to block the deal, Sanofi said.

“It would be inappropriate for the board to take these defensive actions,” Viehbacher wrote in the letter. “If we are unable to have a direct dialog with you, in all fairness you should allow your shareholders the opportunity to decide for themselves whether or not to accept our proposal.”

Seeking a Meeting

Sanofi, which took its $69-a-share offer directly to Genzyme shareholders after Genzyme spurned the bid as too low, still prefers to negotiate a deal, the French company said. Sanofi asked for meetings to discuss the takeover offer.

“They are showing their determination in wanting to pull this deal through,” Forneris, whose firm owns Sanofi shares, said in a telephone interview today. “They are putting pressure on Genzyme’s board members and management.”

Genzyme responded in a statement today by again rejecting the offer as undervaluing the company.

“Our board is unanimous in its view that the $69 offer is not an appropriate starting point for the discussions Sanofi seeks, Termeer wrote Viehbacher in a letter released with the statement. “We are open to a transaction that appropriately recognizes Genzyme’s intrinsic value and prospects. We will meet with Sanofi if it makes an offer that gives our board of directors reason to believe it will lead to that result.”

Available Defenses

Genzyme said in the Oct. 7 filing to the Securities and Exchange Commission that while it had opted out of several anti-takeover protections provided by Massachusetts law, it could reinstate those defenses at any time.

Those include the required approval from a target company’s board or 90 percent of holders of voting stock for a takeover to be successful and the staggering of director elections so all aren’t up for renewed terms simultaneously.

Genzyme also said that while it doesn’t have a shareholder rights plan, or so-called poison pill, that would allow certain investors to buy stock at a discounted price and dilute a potential acquirer’s stake, it could adopt one in the future.

The board of Genzyme authorized its bankers and executives to contact third parties “in order to be fully informed about the company’s value in comparison with the company’s stand-alone strategic plan,” according to the filing. That doesn’t mean the directors have started a process to sell Genzyme, the filing said.