* Genzyme says on track to divest diagnostic, pharma units
* Plans to use proceeds to fund part of $2 bln buyback
* LabCorp says got financing commitment from Citi (Updates with analyst comment, background, adds dateline)
BOSTON, Sept 13 (Reuters) - U.S. biotechnology company Genzyme Corp GENZ.O said on Monday it agreed to sell its genetic testing business to Laboratory Corp of America Holdings LH.N for $925 million in cash.
Genzyme, which recently rejected an $18.5 billion takeover bid from French drugmaker Sanofi-Aventis SASY.PA, said its plan to divest two other units -- diagnostic products and pharmaceutical intermediates -- remains on track. Proceeds from the transactions may be used to fund the second half its $2 billion stock buyback.
The price garnered for Genzyme Genetics, at roughly three times the unit’s 2009 revenue of $371 million, is a decent, though not exceptional one for Cambridge, Massachusetts-based Genzyme, said Salveen Richter, an analyst at Collins Stewart, and shows the company is following through on its stated plans.
Genzyme, which specializes in the manufacture of drugs for rare diseases, has rejected Sanofi’s offer of $69 a share, and sources have said the company wants an offer of $75 a share before it will open its books -- an important process since the company is recovering from a serious manufacturing problem that led to shortages of two key drugs.
The sale of Genzyme’s genetics testing business is unlikely to adversely affect any negotiations between the companies, Richter said.
“If anything these businesses detracted from Genzyme’s value,” she said. “I think this will be perceived positively.”
Sanofi’s chief executive, Chris Viehbacher, said in a recent conference call that the molecular diagnostics business could potentially be interesting to Sanofi, but did not identify it as crucial to an acquisition.
The divestitures are part of a five-point plan Genzyme announced in May designed to increase shareholder value. [ID:nN06219724]
Henri Termeer, Genzyme’s chief executive, said in a statement that the sale of Genzyme Genetics “shows how our management team is uniquely positioned to unlock the underappreciated value of Genzyme’s diverse businesses for shareholders.”
As part of its five-point plan, Genzyme also said it planned to cut costs, and on Friday the company said it had begun laying off employees. It did not say how many people it is letting go, but The Boston Globe said the company plans to cut 1,000 employees worldwide over 15 months. [ID:nN10273089]. Genzyme plans to announce details of the cost-cutting later this week.
LabCorp is buying the entire genetics testing business, including all testing services, technology, intellectual property rights and testing laboratories.
LabCorp also committed to offer jobs to the unit’s nearly 1,900 employees, including senior management, upon closing, Genzyme said.
LabCorp said it obtained a funding commitment from Citi to provide debt financing for the transaction.
Genzyme was advised by Credit Suisse and Goldman Sachs & Co, while Citi and Lazard acted as financial advisers to LabCorp.
Genzyme shares closed at $70.79 Friday on Nasdaq, while LabCorp closed at $76.65 on the New York Stock Exchange. (Additional reporting by Esha Dey in Bangalore) (Reporting by Toni Clarke, editing by Dave Zimmerman)
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