Sanofi offer for Genzyme set to go into extra time

* $18.5 bln bid expires Friday, likely extended by 50 days

* Two sides mull milestone idea for Campath to break impasse

* Genzyme stock still trading above $69/share Sanofi offer

By Ben Hirschler

LONDON, Dec 10 (BestGrowthStock) – Sanofi-Aventis SA’s (SASY.PA: )
$18.5 billion cash offer for Genzyme Corp (GENZ.O: ) looks set to
be extended as a midnight deadline looms on Friday with no sign
of victory, pointing to a fight that will drag on into 2011.

With just hours to go, Genzyme shares were still trading
above Sanofi’s $69 offer price in Europe (GENZ.F: ) after closing
on Nasdaq at $69.99.

Prolonging Sanofi’s tender by 50 days at the same price
would give extra time to seek a compromise, with one scenario
including a scheme linking Genzyme’s value to future performance
of its key experimental multiple sclerosis drug Campath, people
familiar with the situation said earlier this week.

The idea of contingent value rights (CVRs) is favoured by
the Genzyme camp.

Markus Manns, a fund manager at Union Investment in
Frankfurt and a top-20 investor in Sanofi, believes this could
be a workable solution to the impasse.

“We have seen it with other deals already, like Fresenius
(FREG_p.DE: ) when they bought APP. It certainly makes sense,
particularly if companies don’t agree on the sales potential of
an individual drug, like Campath,” he said.

“It’s likely that Sanofi will prolong the offer period just
to buy some time and maybe get easier access to management and
convince them to start negotiations,” Manns added.

Through CVRs, Sanofi could end up paying Genzyme investors
more if Campath proves to be the success Genzyme expects.

“Genzyme is pushing hard on this concept, but Sanofi hasn’t
necessarily bought into this,” said one source, who declined to
be named because he was not authorised to speak to the media.

Termeer said last month he was open to a CVR for Campath and
Sanofi’s finance chief, Jerome Contamine, told Reuters last week
that using such a mechanism to bridge valuation disputes was
interesting in principle. [ID:nLDE6B01WV]

Sanofi has dismissed Genzyme’s $3.5 billion sales estimate
for Campath as “unrealistic” and has pulled together analyst
forecasts giving a $700 million sales average.
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The odds are that hardly any Genzyme investors will have
handed their shares this weekend to Sanofi for $69 each while
they have been trading at more than $70, on average, since July
23, when stories broke of Sanofi’s interest in the group.

Sanofi launched its hostile bid on Oct. 4, frustrated by the
refusal of Genzyme’s board even to sit down and talk.

The French drugmaker’s tender offer for Genzyme ends at
11:59 p.m. New York time on Friday. Sanofi, which people close
to the matter expect to extend the offer by 50 days, must make a
statement before the U.S. stock markets open on Monday.

Viehbacher and Genzyme’s Henri Termeer have met only once,
on Sept. 20, to discuss the situation, but the two may bump into
each other again next month in Davos, when they are both
expected to attend the annual World Economic Forum.

Whether they have anything to discuss will depend on
progress in behind-the-scenes talks between their advisers.

Buying Genzyme would give Sanofi a new area for growth, the
high-margin business of rare diseases, as it seeks to diversify
to make up for patent losses that will take out roughly a third
of its 2008 sales base through to 2013.

It has secured cheap loans for the deal and Deutsche Bank
analysts estimate the acquisition could boost its earnings by
more than 10 percent, helped by “ultra-low” financing costs.

The exact size of the boost, of course, will depend on the
final price paid and industry experts agree that, one way or
another, Sanofi will eventually have to put more on the table.

“In general, you never get an asset for the first offer in
negotiations, so I think it’s clear that they will have to
increase it,” said Union Investment’s Manns. “But from what I
know of Viehbacher and the way they have done past acquisitions,
I would expect them to be careful and not to increase it too
(Additional reporting by Jessica Hall in Philadelphia; Editing
by David Holmes)
($1=.7576 Euro)

Sanofi offer for Genzyme set to go into extra time