Sanofi makes Gen­zyme bid pub­lic, eyes hos­tile bid

The Pak Banker - - Company+Boss News -

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

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