DEALTALK-Sanofi wields threat of proxy battle over Genzyme

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* Sanofi says proxy battle could be an option

* Genzyme’s board is vulnerable due to annual elections

By Jessica Hall

NEW YORK, Oct 13 (BestGrowthStock) – As Sanofi-Aventis (SASY.PA: )
hunkers down for a long battle to buy Genzyme Corp (GENZ.O: ),
the specter of a new proxy battle for control of the U.S.
biotech will become an increasingly real threat, according to
sources familiar with the situation.

Sanofi Chief Executive Chris Viehbacher raised the
possibility in theoretical terms last week when he took his
$18.5 billion bid for Genzyme directly to shareholders.

But at least three sources close to Sanofi have since noted
the French drugmaker wouldn’t balk at a direct effort to
overturn Genzyme’s board if it can’t woo Genzyme CEO Henri
Termeer in the coming months.

“If Sanofi keeps extending its tender offer again and
again, then getting to a proxy battle isn’t that far away or
unrealistic. It’s definitely part of the playbook,” said a
source familiar with the situation, who declined to be
identified by name. The source was not authorized to speak with
the media.

Regardless of the outcome of Sanofi’s tender offer,
Genzyme’s board must approve a deal under Massachusetts law.

Others note that Genzyme has no shortage of forces
agitating for change, including dissident investors Carl Icahn
and Ralph Whitworth, who won representatives on the board
earlier this year. Genzyme also faces at least eight
shareholder lawsuits, according to a filing with securities

Sanofi’s tender offer expires on Dec. 10, but it could
potentially be extended several times until Genzyme’s entire
13-member board faces reelection at the next shareholder
meeting in the spring.

“Sanofi can afford to be patient. It can sit back, wait,
file for its own slate of directors to put maximum pressure on
Genzyme’s board to sit down and negotiate,” said one healthcare
industry banker who declined to be identified by name because
he was not authorized to speak to the media.

“If Genzyme continues to refuse to negotiate, Sanofi can
try to get its own slate elected and work towards a deal that
way,” the banker said.

Genzyme could be vulnerable by an attack on another front
if institutional shareholders get frustrated by Genzyme’s
refusal to negotiate with Sanofi, analysts said.

Relational Investors and Carl Icahn hold 3.8 percent and
4.9 percent of Genzyme, respectively, giving them a key role in
getting a deal.

In June, Icahn abandoned an earlier proxy fight against
Genzyme in return for the biotechnology company’s acceptance of
two of his representatives to its board. Icahn and Relational
could reemerge to launch a new proxy battle to try to get a
board that would be more receptive to a deal.

“A proxy fight is possible but it doesn’t necessarily have
to be fought by Sanofi-Aventis. If there are enough frustrated
shareholders it’ll be interesting to see what happens, they
might be expected to step up to the plate. In the end it might
be Genzyme shareholders fighting the battle for Sanofi,” said
Mike Ward, an analyst at Ambrian in London.

Relational and Icahn could not be immediately reached for


Sanofi’s chief executive, Chris Viehbacher, has said all
options remain open, though it is too early to speculate about
its exact battle plan.

“The Genzyme board needs to be reelected every year in its
entirety at an annual shareholders meeting and one could
anticipate a proxy contest at that point theoretically,”
Viehbacher said in a recent conference call with analysts.

“Viehbacher doesn’t have to do anything until December,
when he gets feedback from shareholders,” Ambrian’s Ward said.

“He may be prepared to let events take their course, see
how many shares are tendered and then assess where to go from
there. The question then comes up, do you raise the bid or
extend the offer period? It might be a stronger signal from
Sanofi to keep the $69 and say ‘this is it,'” Ward said.

Sanofi and Genzyme could not be immediately reached for

Viehbacher has indicated that walking away from a deal with
Genzyme was “an unacceptable option” given its potential value
to Sanofi and the time already invested in it, according to
Genzyme’s filing with the U.S. Securities and Exchange

That disclosure came as Genzyme said it would evaluate
alternatives for its assets, including reaching out to other
companies, to prove it is worth more to investors than what
Sanofi has offered.

Genzyme stressed that despite the move to review its value,
it was not putting the company up for sale. So, the actual
logistics of probing its market value remain unclear.

If Genzyme launched a formal auction process, Sanofi would
want to participate and get a chance to look at Genzyme’s books
along with other potential suitors, sources familiar with the
situation said.

Viehbacher has publicly acknowledged that Genzyme may be
worth more than $69 a share, but it would need to justify a
higher price with more information on Genzyme’s potential
recovery from a manufacturing crisis and the sales potential of
an experimental multiple sclerosis drug, Campath.


Genzyme has several big events looming that could help it
— or hurt it — in its efforts to leverage more money out of

If Genzyme fails to prove its case that it is worth more
than $69 a share, it could become more vulnerable to Sanofi and
an eventual proxy battle, analysts said.

Genzyme plans to host a meeting for shareholders to discuss
its financial outlook, release its data on Campath, the
experimental multiple sclerosis drug, and announce its
quarterly earnings on Oct. 20. It also is looking for a buyer
for two non-core units.

Meanwhile, as part of the consent decree with the U.S.
government, Genzyme is required to move its filling and
finishing operations for products sold in the United States out
of its plant in Boston by Nov. 28. due to a viral

“This is a battle for the hearts and minds of Genzyme
shareholders. In the next few weeks, Genzyme has to be
compelling in its argument that it can deliver more on its
own,” said the industry banker.
(Reporting by Jessica Hall in New York; additional reporting
by Toni Clarke in Boston, Caroline Jacobs and Nina Sovich in
Paris and Quentin Webb in London; Editing by Gary Hill)
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DEALTALK-Sanofi wields threat of proxy battle over Genzyme