Pharmaceutical giant Sanofi-Aventis (SNY) is unwilling to pay more than $70 a share in its bid to buy biotech firm Genzyme (GENZ), Bloomberg and Reuters reported Wednesday, based on unidentified sources with knowledge of the matter. If a deal can't be reached, the French drugmaker may consider alternative takeover targets, Bloomberg added.
Paris-based Sanofi has been courting Cambridge, Mass-based Genzyme for the past month. At first, it initiated talks that were apparently rebuffed. Then, it sent a letter proposing a friendly takeover valued at $69 a share. The board supports an offer of up to $70 a share, but that's a far cry from what Genzyme and its shareholders -- including activist investors Carl Icahn and Ralph Whitworth -- believe the biotech should fetch. Some analysts have said the company could be worth $80 or even $85 a share, but mostly, the word was that Genzyme's board would accept an offer no lower than $75 a share.
Sanofi's board, though, is concerned about manufacturing setbacks at Genzyme, and is unlikely to go above $70 a share. The rare-disease drugmaker is coming off a turbulent year which saw sales and profit slump. Genzyme said earlier this month that it may take three to four years to make production changes required by U.S. regulators after a viral contamination at its Allston Landing factory in Boston caused a plant shutdown and drug shortages.
Other Targets for Sanofi
But Sanofi-Aventis will soon to run up against trouble of its own: a major patent cliff. Five of its eight best-selling drugs will lose patent protection and face generic competition by 2012, and purchasing Genzyme could help it offset lost sales and boost its weak biotech division.
And if not Genzyme, then someone else. According to Bloomberg sources, if the deal with Genzyme fails, the other targets Sanofi may consider including eye-care company Bausch & Lomb, botox and eye-care products maker Allergan (AGN), or Celgene (CELG), a biotech company specializing in oncology. Sanofi has previously said it plans to expand in the eye-care business, Bloomberg said. Previously, Biogen Idec (BIIB) was also identified as a possible takeover target.
Sanofi hasn't ruled out the possibility of a hostile bid for Genzyme, as no companies have offered competing bids so far. At first, reports mentioned GlaxoSmithKline (GSK) and Johnson & Johnson (JNJ) as potential suitors for Genzyme. Bloomberg further added, however, that Sanofi hasn't even started a due diligence review of Genzyme.
Genzyme shares which were up and down over during the day, were essentially flat in afternoon trading, while Sanofi shares were up about 0.1%. Allergan stock, which climbed as much as 2% earlier, traded at just 0.2% higher in the afternoon, while Celgene shares added some 0.9%. Biogen Idec shares had climbed more than 2% by mid-afternoon Wednesday.
Learn the most important step in structuring an investment portfolio.View Course »