Genzyme's Takeover Defense Against Sanofi Is Its Own Incompetence
When Sanofi-Aventis (SNY) began its attempted takeover of Genzyme (GENZ), everyone thought the company was relatively defenseless against a hostile takeover: It dropped its "poison-pill" shareholder rights provisions in 2009 and it has an unstaggered board (meaning company loyalists are up for re-election all at once).
Under the current management, Genzyme's stock was in the toilet, trading below $55 per share. Sanofi is offering somewhere in the region of $70 per share. And, of course, CEO Henri Termeer was eligible for a $22 million payday if he sold, which would also trigger the vesting of $275 million in Genzyme stock that he owns.
This, it seemed, was surely a done deal. Yet there's been an eerie silence hanging over negotiations for the past week. It turns out that Genzyme may indeed have a defense: Its own incompetence.
Sanofi dare not make a hostile bid for Genzyme without getting a good look inside its troubled manufacturing facilities, which have been working below capacity for months due to a cell-line infection. Genzyme has kept the uncertainty over those facilities coming in recent days: it took a $6.5 million one-time writeoff for disposing of some drugs over a quality control issue, and it extended to four years the time it says it will take to get back to full capacity. The previous timeline was two to three years. Genzyme can be fined $15,000 per day by the FDA for being out of compliance.
The only thing going in Sanofi's favor right now is the stock currently trading at $66.53. If Genzyme says no to Sanofi, the price will collapse back to its previous level and Termeer will have to explain why he believes it will climb beyond $70 on its own -- a virtual impossibility, at least for the next four years.
Related:
- Genzyme CEO Has $22M Conflict of Interest in Sanofi Buyout
- Genzyme CEO Would Be Insane Not to Take Sanofi's Buyout Offer
- Don't Look for Strategy Behind Sanofi's Bid for Genzyme: It's All About the Cash