Sanofi makes Genzyme bid public, eyes hostile bid
CALIFORNIA: SanofiAventis SA opened the door to a hostile bid for Genzyme Corp. after going public with an $18.5 billion cash offer for the U.S. biotechnology company and saying it would "consider all alternatives" to complete a deal.
The Paris-based company offered $69 a share in a letter to Genzyme Chief Executive Officer Henri A. Termeer, repeating a proposal made July 29, Sanofi CEO Chris Viehbacher said yesterday. France's largest drugmaker said it's making the bid public after "several unsuccessful attempts to engage Genzyme's management in discussions."
Sanofi is bidding for Genzyme, the world's largest maker of medicines for genetic diseases, as products generating about 20 percent of its revenue face generic rivals by 2013. Viehbacher said on a conference call with reporters yesterday that his goal is to negotiate an agreement to buy Genzyme. Acquiring Genzyme would add to Sanofi earnings and fit with the company's strategy, he said. There is "no assurance" an agreement can be reached between the companies, Sanofi said.
"Now is the right time for Genzyme to consider a transaction that maximizes value for its shareholders," Viehbacher said. "We remain focused on entering into constructive discussions with Genzyme in order to complete this transaction."
Bo Piela, a spokesman for Genzyme, declined to comment. Hostile "It could mean they may go hostile," Mark Schoenebaum, an analyst with ISI Group Inc., said yesterday in a telephone interview. "Basically they're just going to bypass the board and go straight to shareholders."
Genzyme, based in Cambridge, Massachusetts, rose 78 cents to $67.62 on Aug. 27 in Nasdaq Stock Market composite trading. Sanofi declined 11 cents, or 0.2 percent, to 45.15 euros as of 9:31 a.m. in Paris trading today.
The offer represents a 38 percent premium over Genzyme's "unaffected" share price of $49.86 on July 1, Viehbacher said. On July 2, Bloomberg reported Sanofi had briefed its board of directors on plans for an acquisition of about $20 billion in the U.S.
The bid is a 31 percent premium to the one-month historical average price through July 22, the day before press reports that Sanofi was pursuing Genzyme. This values the U.S. company at 36 times its 2010 earnings per share and 20 times its 2011 earnings per share, according to analyst estimates, Sanofi said in a statement yesterday.
Sanofi's board supports an offer of up to $70 a share and was unwilling to raise its price at this stage, three people with knowledge of the matter said last week. They asked not to be identified as the talks are pri- vate.
The French drugmaker will remain "extremely disciplined" on acquisitions, Viehbacher told reporters yesterday.
The offer values Genzyme at about 35 times the $1.96 2010 earnings per share average of analysts surveyed by Bloomberg. Because the value of even some large biotech companies lies in drugs that haven't produced sales or earnings yet, earnings multiples in such acquisitions have varied widely.
Genentech Inc. got 32 times earnings when Roche Holding AG bought the shares of the company it didn't already own in 2009, while MedImmune Inc. got 91 times from AstraZeneca Plc in 2007 and Immunex Corp. got 95 times earnings in its sale to Amgen Inc. in 2002, according to data compiled by Bloomberg.
"We have an extremely compelling offer on t he table," Viehbacher said during the conference call. "Beyond that it's difficult to speculate on the next course of action," he said, adding that Sanofi will take "one step at a time" and that it was too soon to comment on the possibility of a higher offer. The public offer means " management will have no choice but to come out of the bushes and talk to them," said Karl-Heinz Koch, an analyst who covers Sanofi at Helvea SA in Zurich, in a telephone interview yesterday. -Bloomberg