FACTBOX-Details of Sanofi's deal for Genzyme, CVRs and all

Wed Feb 16, 2011 2:38pm EST

Feb 16 (Reuters) - French drugmaker Sanofi-Aventis SA (SASY.PA) will buy U.S. biotechnology company Genzyme Corp GENZ.O for $74 per share in cash plus a tradable contingent value right that can increase in value based on certain milestones. [ID:nLDE71F046]

Below are details of the deal announced on Wednesday:

CONTINGENT VALUE RIGHT

The inclusion of a tradable contingent value right, or CVR, which could rise to a maximum value of $14 as Genzyme meets certain production and sales milestones, was critical to getting the deal done.

The first $1 would be added if specified production levels of Genzyme's Cerezyme and Fabrazyme drugs are met in 2011. Genzyme is working to recover from severe shortages of the drugs for Gaucher and Fabry disease caused by a viral plant contamination in 2009.

The other potential CVR increases relate to approval ($1) and various sales milestones for Lemtrada, a multiple sclerosis drug for which the two companies had widely varying annual sales projections, with Genzyme's as high as $3.5 billion.

Holders, for example, would receive an additional $3 per CVR if net Lemtrada sales exceed $1.8 billion, another $4 if sales exceed $2.3 billion and an additional $3 if global sales exceed $2.8 billion, bringing the total CVR value to $14.

Analysts expect the CVR to trade closer to $2 to $3 once it is issued, as investors will discount the risk of Lemtrada not getting approval and the long time-frame for the payouts.

COST SAVINGS

Sanofi sees cost savings of more than $600 million from the deal beginning in second half of this year, primarily from U.S. back office operations. It did not give details on how it would reach that figure.

Genzyme revenue is expected to replace roughly a third of projected lost sales due to patent expirations on Plavix and other key Sanofi products through 2013.

DEBT

$10 billion of Sanofi's bridge loan is to be refinanced by bond issues and another $5 billion to be refinanced by cash flow. The cost of debt for Genzyme deal seen as 2.5 percent to 3 percent.

LEADERSHIP

Longtime Genzyme Chief Executive Henri Termeer to step down upon deal completion. Sanofi's Chris Viehbacher to remain CEO after completing biggest deal of his tenure.

BANKER AND TERMINATION FEES

Sanofi bankers, Evercore Partners (EVR.N) and JPMorgan (JPM.N), are expected to earn about $50 million to $60 million in fees.

Genzyme bankers, Credit Suisse (CSGN.VX) and Goldman Sachs (GS.N), will earn $53 million to $65 million.

Other banks that stand to earn lending or advisory fees include BNP Paribas (BNPP.PA), Societe Generale SOCN.PA and Morgan Stanley (MS.N).

Genzyme would have to pay $575 million to Sanofi if the deal were terminated.

(Reporting by Bill Berkrot; Editing by Richard Chang)