Sanofi extends $18.5 billion Genzyme offer to Jan 21
PARIS (Reuters) - Sanofi-Aventis extended its $18.5 billion cash offer for U.S. biotech group GENZYME (GENZ.NQ) until January 21 and left open the option to prolong it further, a sign the French drugmaker is ready for a long battle.
Nearly 1 percent of Genzyme shareholders had tendered their shares to Sanofi's $69-a-share offer before an initial deadline expired on Friday, Sanofi said in a statement on Monday.
Sanofi's efforts to buy Genzyme could continue until May, when Genzyme holds its annual shareholder meeting, giving Sanofi a chance to try to overturn Genzyme's board.
"In order to provide additional time to allow holders of Genzyme common stock to tender their shares, the tender is now scheduled to expire at 11:59 p.m. ET on January 21, 2011, unless it is further extended," Sanofi said.
Long takeover battles are not uncommon. U.S. industrial gases company Air Products has been trying to buy Airgas since February, while in the drug sector, it took about eight months before Roche could buy the rest of Genentech it did not already own.
At any rate, analysts widely expect Sanofi can only win Genzyme if it improves its current offer. A Reuters poll in August suggested $78 a share could succeed.
"It's a failure for Sanofi with regard to the number of shares tendered," said Jean-Jacques Le Fur, analyst at Oddo Securities. "Sanofi will need to pay up."
Extending the tender could be a way for both companies, whose chief executives so far seem to have dug in their heels, to tie Genzyme's value to the future sales of its key candidate multiple sclerosis drug, Campath.
"This extension gives Genzyme shareholders time to rethink and acknowledge there is no reason for Sanofi to massively increase its offer without having done due diligence to justify that," a Frankfurt-based analyst said.
"The longer they wait, the higher the risk that Sanofi walks away and also, given that there is no other bidder around, that the share price will fall and they will stay empty handed."
Genzyme CEO Henri Termeer raised the possibility of negotiating a contingent value right (CVR) last month as a way to break the stalemate, and Sanofi Finance Chief Jerome Contamine called it "an interesting idea in principle" to resolve value disputes.
Through CVRs, Sanofi could end up paying Genzyme investors more if Campath proves to be the success Genzyme expects it to be. But that is years away, so investors would need patience.
Sanofi has called Genzyme's $3.5 billion sales estimate for Campath "unrealistic" and put forward a 700 million euro sales average it obtained from several analysts' forecasts.
Sanofi made its interest in Genzyme known in August then put it straight to Genzyme shareholders early in October, as Genzyme's board said the price was too low to even open talks.
Termeer has said he is prepared to sell the Cambridge, Massachusetts-based biotech he built up over 25 years, but not at $69 a share. Genzyme, the world's leading maker of drugs for rare genetic diseases, made sales in 2009 of $4.5 billion.
Genzyme became a takeover target when viral contamination at its plant in Boston led to a manufacturing crisis that caused severe shortages of two of its biggest selling drugs.
Genzyme shares fell from a peak of almost $84 before the manufacturing crisis in 2008 to $45.39 in May, their lowest level since July, 2004. Since Sanofi's interest emerged, the stock has been trading above $69 and as high as $73.23.
Buying Genzyme would give Sanofi a new and high-margin growth area as mounting generic competition will take out roughly a third of its 2008 sales base by 2013.
Sanofi head Chris Viehbacher has said he would only be open to raising the offer if Genzyme's board would discuss the company's valuation.
Sanofi shares closed at 49.31 euros on Friday and have lost 10.4 percent this year. They are trading at about 7 times their expected earnings per share and are the cheapest of Europe's big pharma stocks.
(Additional reporting by Noelle Mennella; Editing by James Regan and Will Waterman)