5th UPDATE: Sanofi-Aventis Goes Hostile With Genzyme Bid
By Mimosa Spencer, Of DOW JONES NEWSWIRES
(Rewrites, adds comments from Sanofi conference call.)
PARIS -(Dow Jones)- French pharmaceutical giant Sanofi-Aventis S.A. (SNY) Monday sought to move forward with its attempt to buy Genzyme Corporation (GENZ) by going hostile and taking its $18.5 billion or $69 per share bid directly to the U.S. biotech's shareholders.
The hostile bid comes more than two months after Sanofi first approached Genzyme, which Sanofi wants to buy, in part to boost its sputtering drug pipeline.
Genzyme, which develops drugs for rare diseases, has consistently rejected the offer as being too low and declined to engage in discussions with Sanofi. The French company's Chief Executive Chris Viehbacher reacted by reaching out to Genzyme shareholders directly in a series of face-to-face meetings in New York.
Some Genzyme shareholders expressed surprise that Sanofi stuck with its original offer. But Viehbacher said it was a logical move.
"Given that there doesn't appear to be another bidder at this stage, we don't see why we would be bidding against ourselves and raising our price in the absence of any new and meaningful information," Viehbacher said Monday of the company's decision to not to raise its offer at this stage.
Sanofi had hoped to gain access to information on Genzyme without going hostile with its offer, specifically to gain insight on Genzyme's manufacturing problems and the potential for its multiple sclerosis drug alemtuzumab, whose brand name is Campath.
Sanofi might have been willing to sweeten its bid if Genzyme's management had agreed to talk, Viehbacher said earlier Monday, adding: "We had no choice but to take the next step", after a meeting with Genzyme Chief Executive Henri Termeer on Sept. 20, which Viehbacher described as "fruitless".
Still, some Genzyme shareholders expect Sanofi will need to raise its $69 per share offer for the target company.
"Viehbacher is impatient and wants to get clock ticking and ball rolling - but he will have to pay more to get it eventually," one shareholder said.
Another Genzyme investor said he thought is was "weird," that Sanofi did not raise its bid after testing levels at around $71 and $72 with investors and given the likelihood that Genzyme's value could increase in coming weeks. Both investors said they expected the price of the bid to go up as Genzyme provides more clarity on manufacturing issues that have plagued the company.
Most analysts said Sanofi's decision to go directly to shareholders with the original offer is logical, even if they expect a higher price will be necessary to clinch a deal.
"It's the only thing they can do under the circumstances," said Ambrian pharmaceuticals analyst Mike Ward.
Ward, who has a hold recommendation on Sanofi, thinks the French drug maker will eventually increase its offer. "I think we'll see a deal done in the $74 to $75 range," he said.
Analysts at Jefferies agreed. "We see the formalization of the offer as the next logical step in progressing this deal forward. However, we see the unaltered $69 offer as a 'sighting shot' and ultimately expect a transaction to be concluded somewhere below the $75 per share level," the broker said in a note.
Genzyme is undergoing a four-year plan to fix its Allston, Mass. drug manufacturing facility that has failed regulatory inspections, caused product shortages and was even temporarily shut down in 2009 because of a viral contamination. Among arguments in support of his bid, Viehbacher has said Sanofi could help Genzyme fix its manufacturing problems.
In his rejection of Sanofi's August offer, Termeer said Genzyme's board found the proposal didn't sufficiently value the company's efforts to fix those manufacturing problems, or the potential of its drugs that are under development.
Genzyme's specialization in drugs for rare diseases is an attraction for large pharmaceutical companies at a time when they are scrambling to find new sources of revenues as patents on their key drugs expire and generic competition looms. So far, though, there has been no sign of an alternative bid emerging for Genzyme.
Sanofi's $18.5 billion tender offer was approved unanimously by Sanofi- Aventis's board of directors, and is to expire at 11.59 p.m. U.S. Eastern time on Dec. 10.
In his letter to Termeer Monday, Viebacher noted that Sanofi had met with Genzyme's largest shareholders owning collectively over 50% of Genzyme's outstanding shares.
"It was clear from our meetings that your shareholders are supportive of our initiative and, like us, are frustrated with your refusal to have meaningful discussions with us regarding our proposal," Viebacher said in the letter.
Viehbacher Monday said reactions on Sanofi's proposed price varied among Genzyme shareholders, but he did not give further details.
Sanofi said its offer represents a 38% premium over Genzyme's share price of $ 49.86 on July 1, and a 31% premium over the one-month historical average share price through July 22, the day prior to reports that Sanofi had made an approach to acquire Genzyme.
Genzyme was not immediately available for comment. The U.S. biotech's board has to make a recommendation on the offer within 10 business days, Viehbacher said.
Under Viehbacher's leadership, Sanofi has sought to bolster future sources of growth including over the counter products and generic drugs to compensate for revenue losses as patents expire on some of its top-selling drugs. The company has slimmed down research projects internally and pursued acquisitions and partnerships for the development of new drugs.
At 1251 GMT, Sanofi shares traded up 0.2% at EUR48.38, outpacing the CAC-40, which traded down 0.5%. The stock has gained 12% in value over the past 12 months.
By Mimosa Spencer, Dow Jones Newswires; +33 1 40 17 1773; mimosa.spencer@ dowjones.com
(Sten Stovall and Marietta Cauchi in London contributed to this article.)
look at this paragraph if you have any doubt about the future of our partnership
Under Viehbacher's leadership, Sanofi has sought to bolster future sources of growth including over the counter products and generic drugs to compensate for revenue losses as patents expire on some of its top-selling drugs. The company has slimmed down research projects internally and pursued acquisitions and partnerships for the development of new drugs.
UNS Price at posting:
$1.04 Sentiment: Hold Disclosure: Held
