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S-A offers $18.5bn for Genzyme

Sanofi-aventis has submitted a non-binding proposal to acquire the troubled US biotech company Genzyme in an all-cash deal worth around $18.5bn

The French pharma firm sanofi-aventis (S-A) has submitted a non-binding proposal to acquire the troubled US biotech company Genzyme, which is focused on treatments for rare diseases, in an all-cash deal worth around $18.5bn.

The deal calls for S-A to pay $69 per share for Genzyme, a 38 per cent premium over the July 1 share price and a 31 per cent premium over the one-month historical average share price through July 22, the day before the media began reporting that S-A was looking to buy Genzyme.

The bid follows a proposal made on Aug 11 that was rejected by Genzyme after the company's management refused even to discuss the offer with the French firm.

S-A said that in publically announcing the terms of the new bid, it is trying to reach Genzyme's shareholders directly with information "after several unsuccessful attempts to engage Genzyme's management in discussions."

Genzyme reported a net loss of $114.9m in the first quarter of this year, due mainly to a $175m fee it was required to pay to the government because of manufacturing violations. The manufacturing problems also caused shortages of Fabrazyme (agalsidase beta) and Cerezyme (imiglucerase), drugs which are usually profit drivers for the company.

"An acquisition by sanofi-aventis would not only position Genzyme to overcome these challenges quickly and successfully by applying sanofi-aventis' global resources and expertise to help realise Genzyme's business strategy, but also deliver near-term compelling value to Genzyme's shareholders that takes into account the company's future upside potential," S-A CEO Christopher A Viehbacher said in a letter sent to Genzyme CEO Henri A Termeer and made available to the media.

S-A noted that its offer represents a multiple of 36 times Genzyme's 2010 earnings per share and 20 times 2011 earnings per share and so takes into account the anticipated recovery in Genzyme's performance in 2011.

Sanofi-aventis said that if the deal goes through, it will make Massachusetts-based Genzyme its global centre for excellence in rare diseases.

"Genzyme's rare disease business would be managed as a stand-alone division under the Genzyme brand, with its own R&D, manufacturing and commercial infrastructure, similar to how sanofi-aventis has handled other recent transactions," Viehbacher promised in the letter. "Genzyme's management and employees would play a key role within sanofi-aventis following the acquisition."

31st August 2010

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