Fortune: PE won't be riding to Genzyme's rescue

Genzyme shouldn't wait for any private equity firms to come riding to its rescue as Sanofi-Aventis musters its forces at the biotech's front gates. At least, that's the reasoning of Fortune's Dan Patrick, who assesses all the reasons why a PE white knight could appear, stage left, but won't.

First, Patrick baits his hook with the track record private equity firms have in these hostile takeover attempts. PE groups took flight as a result of the hostile takeovers of the 80s and often work hand-in-hand with management. (And does anyone doubt Genzyme CEO Henri Termeer's interest in finding a new bidder?) Then there's all the money they're hoarding in reserve. A perfect match for Genzyme? No way. "Can't compete," says a PE insider.

"The first problem is price," writes Patrick. "Sanofi-Aventis will almost certainly need to jump its $69 per share offer by at least a couple of dollars, as evidenced by the fact that it's currently trading above $71 per share. That means private equity firms would need to come up with at least $7.5 billion in equity (assuming 60 percent leverage). Possible via syndication, albeit difficult without the type of sponsor-friendly debt terms that sparked the 2006-2008 buyout boom."

But even if a PE firm could get the money, Sanofi would trump it at the bargaining table. You'll recall all the "synergies" Big Pharma found in mergers with the likes of Schering-Plough and Wyeth? Sanofi can come in following a Genzyme deal and whack hundreds of millions of expenses out of a combined operation with Genzyme. That's the kind of savings a PE group could never find.

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