Things are set to get hostile after Genzyme Corp unanimously rejected a $18.50 billion takeover bid from Sanofi-Aventis, raising the likelihood of a hostile offer from the French drugmaker.
After weeks of speculation, Sanofi released a letter at the weekend detailing a $0.69 per share, non-binding cash offer it made at the end of July and is reiterating. The bid represents a premium of almost 31% over the one-month historical average share price through July 22, 2010, the day prior to press speculation that Sanofi had made an approach to acquire Genzyme.
Sanofi added that the offer represents a multiple of 36 times Genzyme’s 2010 earnings per share and 20 times analyst estimates for 2011 profits, the Paris-headquartered company claims. As such, $18.50 billion "takes into account the upside potential of the anticipated recovery" next year at the US biotech which has struggled badly over the last year or so due to manufacturing problems.
Sanofi chief executive Chris Viehbacher said the offer "provides immediate and certain value for Genzyme shareholders at a substantial premium". He released details of a letter sent to his counterpart Henri Termeer, which stated that Mr Viehbacher is "disappointed that you rejected our proposal on August 11 without discussing its substance with us [and] after our repeated requests, you agreed only to let our respective financial advisors hold a meeting of limited scope".
The Sanofi boss added that a meeting on August 24 "simply served as further confirmation that as throughout you remain unwilling to have constructive discussions". He went on to say that "we are committed to a transaction with Genzyme" and, therefore, "we have taken the step of making this letter public, so as to explain directly to your shareholders our proposal, our actions and our commitment".
Genzyme is not impressed and released its own statement saying that the board, which includes billionaire investor Carl Icahn, has decided unanimously that "this is not the right time to sell the company and reject what it calls Sanofi's "opportunistic takeover proposal". Mr Termeer said the bid "does not begin to recognise the significant progress underway to rectify our manufacturing challenges or the potential for our new-product pipeline".
He added that at the August 24 meeting, Genzyme provided "very useful, non-public information regarding progress the company has made to meaningfully improve its manufacturing capability [and] the tremendous future upside of our multiple sclerosis drug alemtuzumab [Campath] and the company's plans for significant cost reductions".
Mr Termeer went on to say that Mr Viehbacher and his advisors "claim you are willing to pay more but that you are unwilling to 'bid against yourself'. The Genzyme board is not prepared to engage in merger negotiations with Sanofi based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues our company".
Mr Viehbacher has responded to the letter, saying it is "not surprising, and continues the approach of the stonewalling that we've seen up till now." He reiterated his view that the offer is “a realistic starting price”, saying a hostile offer could be the next step if negotiations do not begin again.
Analysts believe that a higher offer may indeed be in the offing but do not see any other bidders coming forward for Genzyme, putting Sanofi in a strong negotiating position.