Let the bidding begin. Wall Street analysts have been engaged in some intense speculation on Sanofi's widely expected bid for Genzyme, with a basic agreement that the pharma company will get started at $68 to $70 a share while targeting a handshake over a mid-70s price.
Sanofi will be doing its best to avoid paying more than the upper 70s, and is already hinting at a hostile takeover attempt--even before it's made a formal offer for the company. Citigroup's Mark Dainty and Yaron Werber say that Sanofi is worth $70 a share based on its cash flow and can command a $5.50 premium from the "synergies" that can be squeezed out of it by a big pharma outfit.
Any big acquisition like this would require a manhunt for such synergies, which means trimming duplicate efforts. That in turn would force some sizable layoffs, as we've already seen in recent months in similar M&A deals. Still, other analysts scoff at the notion that Genzyme should go for less than $80 a share ($21.3 billion).
"$80 was the valuation in 2008, before the manufacturing issues, and without those issues it would be trading there now," Orbimed Advisors' Sven Borho tells Bloomberg. "This hasn't been a great year and you can't base a valuation on it. The growth rate in 2011 could easily be 20 percent or more, and that's one of the highest growth rates in biotech."
One of the wild cards in the M&A drama that's expected to take center stage this week will be Carl Icahn's role. Already well in the black after paying as much as $58.24 for a chunk of Genzyme stock, just about everyone expects Icahn will use his new-found powers inside the big biotech to push hard for the highest price Genzyme can get. One of the big questions, though, is whether anyone--Icahn included--could get a bidding war started. Reuters notes that most of the other big players have either got their own M&A extravaganzas to complete or have sworn off such deals. Even J&J could find Genzyme too big to swallow if the asking price goes over $20 billion.