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Sanofi top 2 shareholders seen wary on Genzyme bid

PARIS/LONDON (Reuters) - Sanofi-Aventis shareholders L'Oreal and Total worry that the French drugmaker will pay too much for U.S. biotech company Genzyme Corp GENZ.O and are not convinced it is the best fit, bankers said.

Cosmetics giant L'Oreal OREP.PA and oil company Total TOTF.PA together own about 15 percent of Sanofi and have representatives on its board. Their misgivings could hamper the ability of Sanofi Chief Executive Chris Viehbacher to raise his bid for Genzyme above a $70 per share limit authorized by the board.

Both shareholders "will have a view on not spending too much money," one banker close to L'Oreal said. One of the sources also said these shareholders believe Sanofi might be better off buying Genzyme rival Shire Plc SHP.LSHPGY.O, which is cheaper.

Sanofi has offered to buy Genzyme, one of the world’s biggest biotech companies and a leading maker of drugs for rare diseases, for $69 a share, according to sources familiar with the situation, valuing the company at about $18.4 billion.

Genzyme is looking for a figure of at least $80 and wants an opening offer of $75 before it will even open its books to the company, people familiar with the situation say.

Bloomberg News reported earlier on Wednesday that Sanofi was not willing to pay more than $70 a share and would consider alternative targets, such as U.S. biotech company Celgene Corp CELG.O or Allergan Inc AGN.N, maker of the Botox anti-wrinkle drug.

Genzyme shares fell as much as 2 percent after the Bloomberg report, but reversed course and closed up 0.3 percent as investors doubted that either alternative would make a suitable target for a Sanofi board so concerned about price.

Sven Borho, a portfolio manager at OrbiMed Advisors, which holds 2 million Genzyme shares, saw the report as an attempt by Sanofi’s advisers to keep Genzyme’s share price under pressure.

“It worked for a second,” Borho said. “There was a lot of shouting in our office, but then a minute later everyone said, ‘nice try, but Sanofi is not going to go and buy Allergan or Celgene instead.’”

Both companies would be far more expensive than Genzyme, which has a market value of $17 billion. Allergan has a market value of $19 billion and Celgene has a market value of $23.5 billion.

TO WALK AWAY?

After weeks of low-level contacts, Sanofi and Genzyme remain apart on price, sources familiar with the talks told Reuters. With no end to the impasse in sight, investors question whether Sanofi could walk away or go hostile.

Sanofi is not ready to launch a hostile bid and has not seriously considered doing so, according to two sources familiar with the situation. One source referred to it as a “drastic and unproductive route” for Sanofi to take given the expense and cross-border nature of the effort.

Adding to the pressure, Total and L’Oreal are concerned about how far Sanofi’s shares have fallen in recent months and think the strategy of bolt-on acquisitions is not a good one.

Sanofi shares have dropped nearly 19 percent this year to just under 45 euros on worries about where it will find new sales as some of its drugs lose patent protection.

L’Oreal bought its shares in Sanofi for 60 euros each and holds about 9 percent of the company. It has said its position is financial and not strategic, and analysts see the potential for it to sell the Sanofi stake to pursue its own deals.

“An acquisition could be a trigger to get rid of this stake to get cash,” Commerzbank analyst Andreas Riemann said.

Additional reporting by James Regan and Pascale Denis in Paris; Jessica Hall in Philadelphia; Ben Hirschler in London and Toni Clarke in Boston; Editing by Michele Gershberg and Robert MacMillan

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