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Genzyme rejects Sanofi's hostile bid

This article was originally published in The Gray Sheet

Executive Summary

Drug maker Sanofi-Aventis launches hostile bid for diversified diagnostic/biotech firm Genzyme Oct. 4 with a tender offer of $69-per-share, or roughly $18.5 billion, only to be rejected again by Genzyme on Oct. 7. Sanofi's offer price, which Genzyme says does not represent fair value, has not increased since it was first made to Genzyme management on July 29. But with no white knight bidder emerging to force Sanofi's hand and Genzyme's management refusing to negotiate, Sanofi said it had little incentive to up the ante and no recourse other than to take the offer directly to Genzyme shareholders. In a filing with the Securities & Exchange Commission Oct. 7, in which Genzyme's board advises shareholders to reject Sanofi's offer, Genzyme said that Sanofi CEO Christopher Viehbacher had suggested a price range of $69- to $80-per share in Sept. 20 discussions with Genzyme CEO Henri Termeer. The hostile offer from Sanofi is largely viewed as a means to bring Genzyme to the negotiating table in what is likely to be a prolonged takeover. Genzyme's stock has been trading at around $71-per-share since Sanofi's offer was made public Aug. 29, suggesting shareholders expect a richer price (1"The Gray Sheet" Sept. 6, 2010). However, Sanofi's current 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, one day before acquisition rumors began circulating. "Sanofi's new overture probably means more active negotiations are inevitable," Bernstein Research analyst Geoff Porges said in a recent report. Genzyme recently agreed to sell its genetic testing business to LabCorp for $925 million (2"The Gray Sheet" Sept. 20, 2010)

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