PARIS/LONDON Sanofi-Aventis' (SASY.PA) top shareholders L'Oreal (OREP.PA) and Total (TOTF.PA) have reservations about the drugmaker's plans to buy Genzyme GENZ.O and are concerned that it does not overpay, bankers said.
Both the cosmetics group and the oil major "will have a view on not spending too much money," one banker close to L'Oreal said, adding L'Oreal was not opposed in principle to a deal, but was not sure Genzyme was the best buy.
Concerns from Sanofi's top shareholders, who together own about 15 percent of the 58 billion-euro ($73.40 billion) company, suggest Sanofi Chief Executive Chris Viehbacher has limited room to raise his offer for Genzyme and keep investors on side.
The CEO sent a takeover proposal valuing Genzyme at about $18.4 bln, or $69 a share, to Genzyme on August 3, after Sanofi's board authorized him to press ahead with a formal offer worth no more than $70, sources familiar with the situation said at the time. But the two sides remain far apart on price, despite continuing low-key friendly talks since then, sources familiar with the talks said. The sources had declined to be named because they were not authorized to speak with the media.
Genzyme is asking for $75 a share as a starting price for Sanofi to gain access to its financial records, one person said.
Sources previously said some members of Genzyme's board wanted $80 a share as an ultimate takeover price. The consensus forecast of analysts polled by Reuters earlier this month was for a final price around $77 to 78.
Bloomberg reported earlier on Wednesday that Sanofi was not willing to pay more than $70 a share for the U.S. biotech group and might look at alternative targets.
However, the DealReporter, a news service associated with the Financial Times, said it understood Sanofi's board was divided on whether to increase its bid to $75 per share and the company was meeting banks to firm up financing commitments.
Genzyme shares fell back initially as much as 2 percent on the Bloomberg report but were 1.1 percent higher by 1617 GMT, while Sanofi ended the day off 0.3 percent.
Sanofi has no plan to launch a hostile bid for Genzyme and never seriously considered that as an option, two sources familiar with the situation said.
Though Genzyme has few anti-takeover protections, an expensive and time-consuming cross-border hostile bid would be a "drastic and unproductive route" for Sanofi to take, one source added.
L'Oreal has said its 9 percent Sanofi stake, which is worth about 5.3 billion euros ($6.7 billion), is financial and not strategic. Cash from selling the stake could fund takeovers, though L'Oreal analysts said there were currently no obvious targets.
"An acquisition could be a trigger to get rid of this stake to get cash," Commerzbank analyst Andreas Riemann said.
L'Oreal bought its shares in Sanofi for 60 euros each. The stock is currently trading at just over 44 euros.
Both Total and L'Oreal are concerned the stock has fallen so much in recent months and think the current Sanofi strategy of constant bolt-on acquisitions is not a good one. Sanofi shares have dropped 15 percent so far this year on worries about where its will find new sales to make up for drugs going off patent.
One banker familiar with the shareholders said they believed there could be other targets better suited for Sanofi, such as Shire (SHP.L), a mid-cap specialty drugmaker with a growing business in rare diseases and a market value of $12 billion.
The banker added that L'Oreal could be more open to Sanofi-Aventis merging with another company rather than making several smaller acquisitions.
Other companies have also been suggested as alternative purchases for Sanofi, including Allergan (AGN.N) and contact lenses maker Bausch & Lomb.
A third banker, who has worked with L'Oreal in the past, doubted the company would be "really determined" to stop Viehbacher striking a deal and said a boardroom fight would be unlikely. However, the banker said the situation highlighted the "divergent interests" between a deal-hungry Sanofi and L'Oreal, which is keen to dispose of its stake in the drugmaker.
($1=.7901 Euro) (Additional reporting by James Regan and Pascale Denis in Paris; Jessica Hall in Philadelphia; and Ben Hirschler in London; Editing by Louise Heavens)