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Genzyme CEO Has $22M Conflict of Interest in Sanofi Buyout

To read the financial press, Sanofi-Aventis' (SNY) attempted acquisition of Genzyme (GENZ) is surrounded in mystery: The two sides are far apart on price and investors expect the haggling will take all summer. Will they agree a price or will Sanofi walk away, not willing to overpay?

The negotiations become a lot less mysterious when you look at the giant conflict of interest that follows Genzyme CEO Henri Termeer into his M&A war room: If he agrees to sell Genzyme he gets a jackpot change-of-control payment worth $22 million. Here's what Genzyme's 2009 proxy says about management's rewards for selling the company (Genzyme hasn't filed a 2010 proxy yet).

Now, with a $22 million nest egg in the balance, what do you think the chances are of Termeer saying no to Sanofi?

Companies give CEOs change-of-control payments as a reward for the increased value to shareholders that acquisitions generally deliver; and to compensate them for the fact that they may find themselves suddenly out of a job years earlier than they planned.

But the payments also hurt shareholders: Some Genzyme investors believe the company is worth $20 billion but Sanofi is only offering $18.7 billion:

Given that Termeer's $22 million is like a giant weight on the "yes!" side of the scale, it seems to me that he has little personal vested interest in haggling Sanofi up to its maximum price.


Image by Flickr user Serge Melki, CC.