PARIS (Reuters) - France’s Sanofi-Aventis launched an $18.5 billion hostile bid for Genzyme, offering $69 per share directly to investors and raising pressure on the U.S. biotech to start negotiations.
Sanofi will eventually have to raise its offer, already rejected by Genzyme a month ago, investors and analysts said after the tender offer was announced on Monday.
Sanofi Chief Executive Chris Viehbacher said he would prefer to hold friendly talks, but was repeatedly rebuffed by Genzyme CEO Henri Termeer over several months of trying to discuss a deal. The all-cash offer expires on December 10.
“Sanofi-Aventis has a history of being a patient, disciplined buyer,” Viehbacher told reporters. “We believe the offer will be successful ultimately.”
Genzyme shares slipped 0.2 percent to $71.02 on Nasdaq and some analysts said a price closer to $75 per share would be needed to seal a deal. Sanofi closed 0.6 percent lower.
“I am pretty sure they will not get it at $69,” said a fund manager at one of the top 10 largest mutual funds invested in Genzyme, adding that Sanofi could still make a deal pay at $80.
“This is the first step in saying we’re going to do this one way or the other. Clearly, $69 is just the opening bid,” said Jon LeCroy, an analyst with Hapoalim Securities.
Viehbacher wants Genzyme to boost Sanofi’s drug portfolio as sales of older medicines decline.
The offer could go higher if Genzyme management provided more information on its business, such as its recovery from a manufacturing crisis and the potential for an experimental multiple sclerosis drug, Campath.
“If someone helped us to understand where there is more value, we would be prepared to consider it,” Viehbacher said.
Genzyme, a maker of costly drugs to treat rare diseases, urged investors to take no action, saying it would review the offer and advise on its formal position within 10 days.
The U.S. biotechnology company’s biggest shareholders include activist investors Relational Investors and Carl Icahn. Both have representatives on Genzyme’s board.
Viehbacher has been courting Genzyme since May 23, when he first spoke to Termeer to discuss a potential transaction, according to a Sanofi regulatory filing.
Termeer asked to postpone the discussions twice as he fended off a proxy battle with Icahn and convened a new board, then responded in July that Genzyme’s directors didn’t believe it was the right time to explore a deal, according to the filing. The two executives finally met on September 20, but the meeting was not productive, Sanofi said.
The CEO of a rival top 10 drugmaker told Reuters last week Viehbacher had little choice but to “fire a missile.”
Sanofi has also been talking with Genzyme shareholders who own more than 50 percent of the company and said they supported its move to buy the company. Viehbacher acknowledged feedback from investors varied considerably.
“It ranged from ‘We want a whole lot more’ to ‘You’ve just made my bonus for this year,’” he said.
The tender offer is 38 percent above the price of Genzyme shares on July 1, before reports emerged that Sanofi was looking at a big U.S. deal. Some Genzyme investors believe the company should be valued closer to $80, where it traded before being hit by a manufacturing crisis that hurt supplies of two of its top-selling drugs two years ago.
To Sanofi’s advantage, there is no sign of another bidder.
“Nothing is standing in their way because there doesn’t seem to be any white knight for Genzyme,” said Jean-Jacques Le Fur of Oddo Securities, who believes Viehbacher wants to close the deal by year’s end after securing financing at a favorable rate.
“They’ll probably decide whether to raise the bid based on how the tender offer goes. ... I think their limit is $75.”
Viehbacher has been helped by the fact that banks are willing to lend at cheap rates for acquisitions, which has helped fuel a rise in hostile bids across many industries.
Thomson Reuters data showed unsolicited bids accounting for 8 percent of global mergers and acquisitions so far in 2010 — the highest percentage in at least a decade.
Sanofi said it had secured $15 billion in financing for the Genzyme deal from J.P. Morgan, Societe Generale and BNP Paribas, with $10 billion in 18-month loans and $5 billion for 3-1/2 years.
Additional reporting by Noelle Mennella, with Ben Hirschler, Cecilia Valente and Quentin Webb in London, and Lewis Krauskopf in New York; Editing by David Cowell and Richard Chang