After months of courting U.S. drugmaker Genzyme (GENZ), French pharmaceutical company Sanofi-Aventis (SNY) launched a hostile bid valued at approximately $18.5 billion, or $69 a share, for all outstanding shares of Genzyme common stock. Genzyme rebuffed Sanofi's previous offers, leading many to believe a hostile takeover was next as the two companies continue to flex their muscles.

"Our strong preference has been and continues to be to work together constructively with the Genzyme Board to reach a mutually agreeable transaction, but our attempts to do so have been blocked at every turn," said Sanofi's CEO Christopher Viehbacher in a statement.

"Blocked at Every Turn"

He added that the meeting between the two CEOs on Sept. 20 "proved unproductive." Meanwhile, shareholders representing 50% of Genzyme voiced their frustration with management's "unwillingness to engage in constructive discussions," Sanofi said.

"You were also unwilling to provide us with your perspective on an appropriate valuation for Genzyme," Viehbacher wrote to Genzyme CEO Henri Termeer. "You have, therefore, left us no alternative but to commence a tender offer and take our offer directly to your shareholders. We strongly believe that our offer price of $69.00 per share in cash is compelling and represents substantial value for Genzyme's shareholders."

But Termeer already called the previous $69-a-share proposal "opportunistic," saying it represents "an unrealistic starting price that dramatically undervalues our company," especially in light of all the improvements at the biotech.

The tender offer represents a premium of almost 31% over the one-month historical average share price through July 22, the day prior to press speculation regarding the acquisition. Cambridge, Mass.-based Genzyme traded just around $50 before Paris-based Sanofi's intentions surfaced.

While the gap in price between the two is large, and Viehbacher may be right about shareholders' frustration with management, many believe shareholders -- including Carl Icahn and Ralph Whitworth who recently gained board seats -- would like to see an offer of $80 and even $85 per share. Sanofi's board was reportedly not willing to approve anything over $70 a share, though recent reports indicate the company might increase its $69 offer by a dollar or two per share. Many analysts believe an offer around $75 could do the trick.

Genzyme is coming off a turbulent year, which saw sales and profit slump. But the biotech, which specializes in creating drugs for rare diseases, still holds considerable appeal for a company like Sanofi-Aventis, which is facing a major patent cliff: Five of its eight best-selling drugs will lose patent protection and face generic competition by 2012. Genzyme could help it offset lost sales and boost its weak biotech division.

Sanofi said it will file the proper documents Monday with the U.S. Securities and Exchange Commission. The tender offer, which is scheduled to expire on Dec. 10, 2010, is conditioned on the tender of a majority of the outstanding shares of Genzyme common stock; the approval of Genzyme's board; the required regulatory approvals; and Genzyme not entering into any deals that could change its value. Already, Genzyme sold its Genzyme Genetics in mid-September.

Sanofi shares fell over 1% in Europe following the news.

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