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S-A's bid for Genzyme gets hostile

After US biotech Genzyme rejected a 'friendly' offer from sanofi-aventis, the French company has launched a hostile $18.5bn takeover bid

Sanofi-aventis (S-A) has launched a hostile $69-per-share takeover bid for US biotech Genzyme, valuing the company at $18.5bn. The unsolicited, all-cash offer will expire on December 10 2010. The $69 per share bid is a 31 per cent premium over Genzyme's one-month average up until the day before rumours of the takeover surfaced. 

Genzyme has claimed that the 'opportunistic' offer 'dramatically undervalues' the company, whose shares closed at $70.88 on October 1 and opened slightly higher on October 4. However, S-A chief executive Chris Viehbacher told CNBC that he believes the price accurately reflects "where the market thinks the company actually is."

Informal takeover talks between the two companies began in July. On August 11 the French company made a proposal that Genzyme refused to discuss, which was followed at the end of the month by S-A submitting a non-binding proposal to acquire Genzyme in an $18.5bn all-cash deal. Though the bid has now become hostile, the terms have not been changed.

"[In a meeting with Genzyme shareholders] it was clear [that they] are supportive of our initiative and, like us, are frustrated with your refusal to have meaningful discussions with us regarding our proposal," Chris Viehbacher wrote in a letter addressed to Henri Termeer, chief executive of Genzyme. 

When talks between S-A and Genzyme began, the biotech had a market capitalisation of close to $14bn. The troubled biotech announced in mid-September that it was planning to cut 1,000 jobs worldwide within 15 months, to sell non-core businesses and to initiate a buy-back of its stock (due to be completed in March 2011) in a bid to reduce share price volatility.

This followed manufacturing problems last year, when Genzyme had a viral contamination at one of its plants. Genzyme hopes these problems will be resolved early next year. 

Analysts predict that any takeover of Genzyme will cost S-A up to $77 per share if it is to be successful, although some have argued that, in light of the number of mergers and acquisitions in recent years, Genzyme will struggle to increase its price. Carl Icahn, a prominent major stakeholder in Genzyme whose representatives hold two of the 13 seats on the biotech's board, has hinted that he will sell if the price is right.

The takeover would allow S-A to diversify its portfolio and provide it with access to Genzyme's drugs for rare diseases, which are less vulnerable to generic competition. If successful, this will be the largest hostile takeover since Roche Holdings acquired Genentech for $47bn in 2008.

4th October 2010


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