Tensions rise in Sanofi-Genzyme bid war

PARIS (Reuters) - Sanofi-Aventis SASY.PA dismissed a claim by bid target Genzyme GENZ.O that it dangled a higher price for the U.S. biotech company, as a transatlantic takeover fight descended into an ill-tempered stand-off on Friday.

A sign marks the headquarters of Genzyme in Cambridge, Massachusetts August 3, 2010. REUTERS/Brian Snyder

Genzyme said on Thursday that Sanofi’s chief executive floated the possibility of paying as much as $80 per share at a meeting in September before going hostile with a bid worth $69 per Genzyme share, or a total $18.5 billion.

The French drugmaker disputed this account of events on Friday, with chief spokesman Jean-Marc Podvin saying: “We offered no price range and Genzyme continued to refuse to engage with us on discussions on valuations.”

A banker familiar with the deal said: “This is the game. This is normal in negotiations. It is a game of nerves at this point.”

Analysts said the row highlighted expectations Sanofi may have to raise its offer -- Genzyme shares rose to a year-high of $73.05 in after-hours U.S. trading.

Sanofi shares were down 0.2 percent at 48.88 euros by 1130 GMT, with the European drugs sector .SXDP off 0.1 percent.

Sanofi wants to add Genzyme, the world’s largest maker of drugs for rare genetic diseases, to its portfolio to help drive earnings growth through a “cliff” of patent expiries on established blockbuster drugs.

Since news of Sanofi’s interest in the U.S. company emerged, the rhetoric between Genzyme chief executive Henri Termeer and his Sanofi counterpart Chris Viehbacher has ratcheted up.

Termeer, a founder of Genzyme and deeply invested in both his company and its legacy, appears ready for a long fight.

Viehbacher, who cut his teeth on a number of smaller deals both at Sanofi Aventis and as head of North American operations at GlaxoSmithKline, also seems prepared to shape his legacy and leadership around an ability to get the deal done on his terms.

The exchanges between the two CEOs could have an impact on how quickly the bid battle is resolved, with a continued hostile campaign likely to last well into 2011, analysts said.

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The latest twist centers on what happened when the two met in the United States on September 20.

According to a Genzyme securities filing, Viehbacher told Termeer the two should discuss a deal price range of $69-$80. Viehbacher, according to Genzyme, said the price range was “manageable” but doubted he could reach the higher end based on his current understanding of the U.S. company’s business.

Two weeks after the meeting, Sanofi took its $69 per share offer directly to Genzyme shareholders.

Sanofi denied putting any kind of offer on the table.

“We strongly disagree with Genzyme’s characterization of the September 20 meeting,” Podvin said. “At that meeting we made a variety of efforts to move the process forwards, including discussing the merits of our $69 per share offer and we tried to understand if media reports about Genzyme’s price expectations were accurate.”

A Reuters poll in August found the average price forecast by analysts was $77.90 a share.


Many analysts believe an all-cash deal -- funded by plentiful cheap loans -- would enhance Sanofi earnings comfortably even at the mid-$70s level.

“I think the offer will be raised but I am not sure that it will go as high as $80,” said analyst Jean-Jacques Le Fur at Oddo Securities in Paris.

“According to my calculations, to create value the offer should not go above $75. Sanofi is in a position of strength because it is probably alone in the race and the board and management of Sanofi don’t seem to want to go too high.”

For Genzyme, however, such a deal would see it selling out below a peak above $83 reached in 2008 before the company ran into manufacturing problems that hit the stock.

Viehbacher has said Genzyme may be worth more than $69 a share but the U.S. company would need to justify a higher price with more information on its potential recovery from the manufacturing crisis and the sales potential from an experimental multiple sclerosis drug, Campath. N05200562

A source familiar with the discussions said Sanofi could sit back and wait while its offer ticks toward a December 10 expiry date, hoping Genzyme or its shareholders lose their nerve.

If Genzyme’s share price started to fall to $69 or below, Sanofi’s offer could begin to look good and shareholders might force management to the table.

Genzyme might push its bankers to find an elusive second bidder if Sanofi holds at $69. But prospective white knights have been thin on the ground.

Reiterating its rejection of Sanofi’s bid, Genzyme said on Thursday it would evaluate alternatives for its assets, including reaching out to other companies to prove it is worth more to investors than Sanofi’s offer.

The source familiar with the negotiations said the deal might not be struck until Termeer resigned or was removed by his board. “This could end up in a proxy fight again for Genzyme.”

Additional reporting by Nina Sovich in Paris and Ben Hirschler in London; Writing by Tim Hepher; Editing by Greg Mahlich and Dan Lalor