Just How Much Is Sanofi Aventis Offering for Genzyme?

Sanofi AventisJust after Genzyme (GENZ) announced Monday that it signed a confidentiality agreement with Sanofi Aventis (SNY) to allow the French drugmaker to examine its books, leaks about the potential deal started pouring out. While not all reports are exactly the same, they seem to converge on a bid in the low $70s per share upfront, plus potential milestone payments worth $5 to $6 a share.

The two companies have been in a takeover battle for several months, playing a sometimes public game of chicken full of colorful language. Paris-based Sanofi started with a $69-per-share offer, or $18.5 billion, for the Cambridge, Mass. biotech, and hasn't raised it since. The rare-disease drugmaker had repeatedly rejected Sanofi's offer.

Lately, an idea was floated of a contingent value right (CVR), or a payout based on future performance of Genzyme's drug Campath -- a leukemia drug tested for multiple sclerosis under the name Lemtrada -- because the two can't even agree on the value of this potential blockbuster. Genzyme expects peak sales of $3.5 billion, while Sanofi put that number at $700 million.

Take Your Choice

Finally, though, it seems the two sides are making some progress. Reuters reported that Sanofi has agreed to raise its bid for Genzyme to the low $70s-per-share range, plus a payment based on the performance of Lemtrada, according to one source. This payment could raise the final valuation to the "very high $70s," a second source said.

Bloomberg's sources said Sanofi may increase its initial offer by about $2, with CVR payments likely to be worth about $5 to $6 a share depending on sales of Lemtrada (or nothing, if the drug isn't cleared by regulators) for a total of $76 to $77 per share. But Genzyme, other sources said, is seeking a higher cash payment upfront of $74 to $75 per share, and a smaller CVR of about $2.

That would be more in line with what The Wall Street Journal is reporting based on its sources -- a deal in the range of $74 a share in cash upfront and CVR payments that could initially be worth around $2 a share, but eventually be worth $5 to $6 a share. Sources told the Journal that Genzyme wouldn't have allowed Sanofi to do due diligence if it had offered less than $72 a share in upfront cash.

The Boston Globe also reported that Sanofi has agreed to raise its acquisition offer, but by an unspecified amount. And The New York Time's Dealbook report seems to generally agree with the rest: Low $70s plus CVR potentially worth $5 to $6 a share.

Caution Amid Setbacks

Seems like investors won't have too wait long to find out, though, because several sources say the deal could be reached within a week. For now, Sanofi's due diligence review will likely focus on Genzyme's manufacturing plant in Allston, Mass., following a contamination there and the consent decree the biotech signed with U.S. regulators.

Sanofi, not unlike many of its rivals, is expected to be cautious about 2011 when it reports earnings next week. The company, which is set to lose patent protection on key drugs, has also experienced recent setbacks with several drug failures. Adding those together, and Sanofi seems to need Genzyme and its lineup of biologic drugs that much more.

For now, Genzyme trades around $73.35. Of course, Sanofi's next offer may not be the final one -- and the saga may yet continue.

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