Sanofi-Aventis has decided to turn its bear hug on Genzyme into a hostile embrace. In yet another slow but deliberate step, the pharma giant is taking its offer straight to shareholders, but so far is sticking with its original $69 per share bid. Sanofi's board is reportedly considering an increase in the bid.
In a letter to Genzyme CEO Henri Termeer (photo), who has dug his heels in against an initial bid that he believes doesn't come close to the company's real value, Sanofi chief Chris Viehbacher (photo) explains that he had met with shareholders who hold more than half of the company's stock. And they are "supportive of our initiative and, like us, are frustrated with your refusal to have meaningful discussions with us regarding our proposal."
Termeer's position is that Sanofi is low-balling its offer because of the manufacturing woes that hit Genzyme recently. But he believes the manufacturing issues are being resolved with the company undergoing a restructuring that is returning the company to its old glory days, when its stock traded north of $80. While he's talked about stepping aside next year to allow a takeover to go through, Termeer has shown no sign of budging on a demand to see more of Sanofi's money on the table before the company takes a place at the negotiating table.
Sanofi may have support for his bid among some of Genzyme's biggest shareholders, but no one expects them to sell for $69 a share. Analysts expect the bidding to rise into the $70s, but there's a considerable amount of disagreement over how high the bid will have to go before Sanofi can expect to land a majority of the stock.
"He might need to squeeze it up slightly to get some of the more hard-core on board later on in the process, but it makes sense to go with the offer that's out there," Mike Ward, an industry analyst at Ambrian Partners, tells Reuters. For Viebacher's part, the CEO says that he'll stick to tradition. "Sanofi-Aventis has a history of being a patient, disciplined buyer," explains the CEO. "We believe the offer will be successful ultimately."