Sanofi Offer Set to Expire, Public Position Remains Unchanged

Jan 20, 2011

Last Friday, French daily Le Figaro reported that sanofi-aventis intended to reach an acquisition agreement with Genzyme that would value the latter company at roughly $76 per share, or a total of $20 billion. The company would not confirm the report, however, according to Reuters.

sanofi’s current offer, which expires on Jan. 21, 2011, is to pay $69 per share of Genzyme. The offer first expired on Dec. 10, 2010, but sanofi extended it when fewer than 1% of Genzyme’s shareholders tendered their shares. Henri A. Termeer, Genzyme’s CEO, said that the offer undervalued his company.

The agreement reported in Le Figaro, as described by unnamed sources, would include $70 to $71 in cash, combined with a contingent value right (CVR), which is an additional payment in the event that certain conditions are met. sanofi’s offer would be to give Genzyme shareholders additional payment based on the regulatory approval of Genzyme’s Campath treatment for multiple sclerosis, according to Le Figaro.

By Jan. 10, 2011, discussions between the two companies’ financial advisers had broadened to include representatives of both companies, according to a Genzyme press release. The discussions focused on the terms of a potential agreement, including the possible use of a CVR to bridge the parties’ differences about Genzyme’s value.

“It is clear that Sanofi would have to increase the price a little bit,” a fund manager investing in both companies told Reuters. “Something between 70 and 80 is an offer almost everybody could feel satisfied with.”

Genzyme investors might consider a sanofi offer of $76, including a higher share price and a CVR, as too low, according to Reuters. Yet circumstances might persuade shareholders to accept such an offer. “It looks like Sanofi is the only one at the moment who could be interested, which is a good bargaining tool for Sanofi,” the fund manager told Reuters.

An acquisition by sanofi would help Genzyme expand its business in existing markets and emerging markets. A deal also would help sanofi grow its rare-diseases business and diversify its activities to make up for patent losses.

See related PharmTech articles:
The Latest Sanofi/Genzyme Rumors (blog post)

Success Is Unlikely on sanofi’s Terms (blog post)

Sanofi And Genzyme Still At War (Pharm Tech Europe)