|THE OFFER: $69 A SHARE
“I’d like to hope that reasonable minds would prevail,” said Sanofi CEO Christopher Viehbacher, hinting he may appeal to shareholders.
Drug giant bids $18.5b for Genzyme
Sanofi increases pressure on state’s biggest biotech
French drug maker Sanofi-Aventis SA yesterday went public with an offer to buy Genzyme Corp. for $18.5 billion in cash, a move intended to step up pressure on the Cambridge company after what Sanofi executives said was a rebuff from Genzyme’s board.
Sanofi’s nonbinding bid to take over Genzyme, the largest biotechnology company in Massachusetts, amounts to an offer of $69 a share, far less than the $80 some Genzyme investors hoped the company would fetch.
The bid, though, represents a 38 percent premium over Genzyme’s share price of $49.86 on July 1, before news that Sanofi planned to make a major acquisition drove up the prices of Genzyme and other biotechs. Genzyme’s share price closed Friday at $67.62.
“We’re a little surprised we haven’t had an opportunity to engage’’ Genzyme executives, Christopher A. Viehbacher Sanofi’s chief executive, said in an interview. “We believe we’ve made a compelling offer. So it’s a logical next step to communicate directly to company shareholders. We think it’s in the best interest of the company to sit down with us and understand where our differences are.’’
Viehbacher accompanied Sanofi’s offer yesterday with a letter to Genzyme’s chief executive, Henri A. Termeer, repeating a previous invitation to meet and insisting that Sanofi was “prepared to consider all alternatives to complete this transaction.’’
Viehbacher would not elaborate on what those alternatives might be. But he hinted Sanofi could make a tender offer for Genzyme shares, bypassing the company’s directors and appealing directly to shareholders.
“I’d like to hope that reasonable minds would prevail here,’’ Viehbacher said. “There’s clearly an interest on behalf of shareholders.’’
Bo Piela, Genzyme’s vice president, yesterday said the company would not comment on Sanofi’s offer or the letter to Termeer, who has frequently said Genzyme is not for sale.
Asking stockowners to tender their shares, even when a company’s management is opposed to a sale, has become a more common tactic on Wall Street in recent years. It has been used in proposed biotechnology transactions by would-be buyers such as Roche Holdings AG, said Harry Glorikian, managing partner at Scientia Advisors, a life-sciences consulting firm in Cambridge.
“Genzyme’s hand could be forced,’’ Glorikian said. “A shareholder might say, ‘I’ll take the $69. We’ve had some production problems, and we don’t know what’s around the corner.’ If enough shareholders think it’s a good deal, they’ve essentially sold the company.’’
Rumors of a Sanofi bid for Genzyme have been circulating in the investment world for more than a month. During that time, Genzyme has accelerated its efforts to recover from a series of manufacturing problems that forced it to suspend production and decontaminate its Allston Landing plant last summer after a virus was discovered in a bioreactor used to make drugs.
The shutdown led to the rationing of a pair of best-selling treatments for two rare genetic disorders and caused the company to lose market share to a rival, Shire PLC.
Until yesterday, neither Sanofi nor Genzyme had publicly acknowledged the French company had made acquisition overtures.
Viehbacher said he broached the possibility of a buyout in a phone call to Termeer in late June, shortly after the longtime Genzyme chief had fended off an attempt by shareholder activist Carl C. Icahn to remove him from the board. That was followed by a formal Sanofi letter on July 29 spelling out the $69-a-share offer. Genzyme’s board rejected that proposal in a letter to Sanofi on Aug. 11.
Since then, Sanofi has continued to propose meetings between the companies’ chief executives or their advisers. Termeer has been unwilling to meet, Viehbacher said. Though the companies’ investment bankers met Aug. 24, Genzyme’s response has been unsatisfactory, said Viehbacher, who described Sanofi’s leadership as frustrated by the process and eager to move forward.
“We are committed to a transaction with Genzyme and, therefore, we feel we are left with no choice but to take our compelling proposal directly to your shareholders by making its terms public,’’ Viehbacher wrote to Termeer.
Sanofi, like other major pharmaceutical companies, is seeking to expand into the faster-growing biotechnology field to offset a loss of revenue to generic drug makers. Its most recent challenge has been the emergence of generic competition for Lovenox, a blockbuster anticlotting drug Sanofi bought last year for $3.9 billion. Genzyme would be the largest acquisition by Sanofi-Aventis since it was formed through the 2004 merger of two French drug giants.
Viehbacher, who is based in Paris, said his company has set its sights on the Boston area’s biotech cluster as a source of innovation in coming years.
Sanofi is planning a $65 million expansion that will bring 300 new jobs to Cambridge, where it has a research and development site formerly operated by the British vaccine maker Acambis PLC. Sanofi acquired Acambis, which also runs a 60-person distribution facility in Canton, in 2008.
“You can see we’re interested in Cambridge and would like to extend our presence,’’ Viehbacher said.
But whether going public will push Genzyme executives to the bargaining table is unclear.
Last week, the company moved to reassure investors and customers that it was making progress in fixing its production problems, notifying thousands of patients and doctors that it plans to double shipments next month of the two drugs it has been rationing for the past year: Cerezyme for Gaucher disease and Fabrazyme for Fabry disease.
Both are rare enzyme deficiencies that cause a buildup of waste, shutting down vital organs and weakening bones. The drugs can cost up to $300,000 a year per patient.
Viehbacher, however, said investors had already factored the company’s recovery program — which could take years to complete — into its stock price prior to the Sanofi offer. He suggested Genzyme’s shares would probably tumble if the company turns down Sanofi’s bid.
“The company’s got problems that are well documented,’’ he said. “It’s not just a short-term production problem.’’
“We think we can get the company on track faster,’’ he added.
Viehbacher said he had not communicated directly with Icahn or Ralph Whitworth, two activist investors who are now represented on Genzyme’s board. Both are expected to influence Genzyme’s response to Sanofi.
“We can add an awful lot to this company,’’ Viehbacher said.
“We’re a company that’s very respectful of another company’s culture. . . . I’m sure that shareholders of a lot of other companies would like to get the kind of generous offer we’ve made. But we’re very focused on Genzyme.’’
Robert Weisman can be reached at firstname.lastname@example.org.