UPDATE 4-Sanofi makes $69/share Genzyme offer public

* Makes $69/share offer for Genzyme public

* Sanofi says failed to engage Genzyme in talks

* Says will consider all options to reach a deal
(Adds analysts’ comments in paragraphs 7-8, 27-28)

By Jessica Hall and James Regan

PHILADELPHIA/PARIS, Aug 29 (BestGrowthStock) – France’s
Sanofi-Aventis (SASY.PA: ) on Sunday publicly disclosed its $18.5
billion, $69-per-share cash offer for Genzyme Corp (GENZ.O: ) in
a bid to rouse shareholders after failing to engage the U.S.
biotechnology company in merger talks.

Sanofi said it is considering all options to complete the
transaction, hinting it would consider a hostile takeover bid.

The so-called “bear hug” letter aims to pressure Genzyme to
respond to the offer or justify to its shareholders why it has
not held negotiations.

“It is our preference to work together with you and the
Genzyme board to reach a mutually agreeable transaction,”
Sanofi Chief Executive Chris Viehbacher wrote to his
counterpart at Genzyme, Henri Termeer.

“Your continued refusal to enter into constructive
discussions will serve only to further delay the ability of
your shareholders to receive the substantial value represented
by our all-cash offer,” the letter said.

Genzyme was not immediately available for comment.

“I’m pleased to see they’re being disciplined in price,”
said Marc Booty, a fund manager at Pictet. “This is a very
interesting first salvo.”

“It’s a clever strategy. They weren’t getting anywhere in
negotiations and now they’re trying to flush out other buyers
and information from Genzyme to justify if a higher price is
required,” Booty said.

Sanofi has stopped short of making a direct approach to
Genzyme shareholders and sources familiar with the matter have
said it is not keen to do so. But analysts and traders said its
move on Sunday takes the company one step closer to a hostile

“This signals that they are willing to play hardball and
could go hostile. The fact that they are standing pat with
their offer is a sign they aren’t going to be swayed from their
course,” said an arbitrageur, who declined to be named because
he was not authorized to speak to the media.

“That’s not a positive for Genzyme holders, who have been
hoping for a higher premium,” said the trader, who specializes
in takeover stocks.

Sources previously told Reuters that Genzyme wants an offer
of at least $75 per share before Sanofi could review its
private financial records. Some shareholders want as much as
$80 a share to clinch a deal.

However, Sanofi’s top two shareholders — cosmetics group
L’Oreal (OREP.PA: ) and oil company Total SA (TOTF.PA: ) — worry
that the company might pay too much for Genzyme and are not
convinced it is the best fit, bankers said last week. For
details, see [ID:nN25133182]

News of Sanofi’s initial approach to Genzyme emerged late
in July and the French drugmaker sent a written expression of
interest on July 29.

Sanofi said that Genzyme rebuffed the offer on Aug. 11, but
after some persuasion, agreed to a meeting of financial
advisers on Aug. 24.

“We had one phone call in general terms and (Genzyme)
immediately called a board meeting and said they weren’t for
sale without me even saying the price,” Viehbacher said on a
conference call.

When asked about how Sanofi will proceed, Viehbacher said:
“There is no reason to be discussing the next step when we are
at this step now … No reason to be discussing another


Analysts have said they expect a deal to be finalized in
the range of $74 to $77 a share. If Sanofi walks away, analysts
see shares of Genzyme falling to the low $50-range. Some say it
could take at least a year for them to rebuild the lost value.

“Of course Sanofi will go hostile if management doesn’t
accept the offer,” said Karl Heinz Koch, an analyst at Helvea
in Zurich.

“I think this is a great offer. What do you do as a
shareholder if the stock’s at $52.50 and you can sell at $69?
You get rid of your shares. I don’t think Sanofi (will) have to
raise their offer much,” Koch said.

Sanofi said it had taken into account an “anticipated
recovery in Genzyme’s performance in 2011,” as the biotech
company tries to rectify manufacturing problems that led to
shortages of two of its top drugs — Cerezyme, its drug to
treat Gaucher disease, and Fabrazyme, its drug for Fabry
disease — and hit its stock price over the past year.

Genzyme is the world’s dominant supplier of drugs to treat
Gaucher and Fabry disease, which are rare, inherited disorders
in which patients lack, or are deficient in, key enzymes for
breaking down fats.

Sanofi said it believes it could help Genzyme fix its
manufacturing problems “quickly and successfully” and perhaps
accelerate the process with the expertise of the combined

Last year Genzyme was forced to temporarily close its
manufacturing plant in Boston because of a viral contamination,
leading to shortages of Cerezyme and Fabrazyme. Genzyme has
said it could take up to four years to resolve the problems.

“I understand management doesn’t want to sell below value,
that they want to stage a recovery first before starting
negotiations,” Koch said.

Sanofi said its offer represents almost a 31 percent
premium over Genzyme’s stock price before press speculation
that a bid had been made. Based on analyst consensus estimates,
the offer represents a multiple of 36 times Genzyme’s 2010
earnings per share and 20 times 2011 earnings per share, Sanofi

“The big question is exactly what the difficulties are with
the manufacturing problems at Genzyme and to assess that Sanofi
needs to see the books,” said Mike Ward, an industry analyst at
Ambrian Partners in London.

“I suspect they will go a little bit higher — the
mid-$70’s should probably do it,” Ward said.

Sanofi said it had financing for the offer from BNP Paribas
and JP Morgan and that it has not talked to Genzyme activist
shareholders. Shareholders Relational Investors and Carl Icahn
hold 3.8 percent and 4.9 percent of Genzyme, respectively.

Relational and Icahn could not be immediately reached for

UPDATE 4-Sanofi makes $69/share Genzyme offer public