Sanofi's Hostile Bid Triggered by Genzyme CEO's Selective Deafness
Sanofi-Aventis (SNY)'s hostile takeover bid for Genzyme (GENZ) can be framed as "The Fight for a Cure for Multiple Sclerosis," if you want to view it through a lofty, noble prism. The prize is Genzyme's blood cancer drug, Campath, which the company has belatedly discovered may be an inexpensive and incredibly effective therapy for M.S., the progressive nerve disorder that eventually paralyzes its victims.
Genzyme CEO Henri Termeer believes Sanofi's $69 a share offer doesn't properly value Campath (also known as alemtuzumab) even though it represents a 38 percent premium over the price that Genzyme's shares were trading at before Sanofi became interested in buying them.
But one of the reasons the bid has gone hostile is because of Sanofi CEO Chris Viehbacher's anger over Termeer's refusal to meet with him to at least discuss a buyout. In Sanofi's offering document, the company describes all the contact it has had with Genzyme so far. It's a biased account -- it was written by and favors Sanofi, after all -- but it gives an accurate account of Viehbacher's view of the situation, including the things that ticked him off.
Viehbacher first got in touch with Termeer in May, when Genzyme was fending off a proxy fight that eventually resulted in insurgent investor Carl Icahn getting two of his men onto the Genzyme board. Termeer told Viehbacher to come back when he was done fighting Icahn.
That turned out to set the tone of interactions between the two men for the rest of the summer: Between May and October, Viehbacher contacted Termeer four times to request a meeting at which he might at least discuss a buyout. Termeer rejected each offer, even though in the first two invitations he didn't even know how much Sanofi was willing to pay.
Even though the Sanofi-Genzyme soap opera has been dragging on for months, the two men only met for the first time on Sept. 20.
Termeer's lack of curiosity about what Viehbacher might have to say is astonishing given that such a buyout will give Termeer a $22 million golden parachute. You can sense Viehbacher's frustration with Termeer's studied deafness in his Aug. 29 letter, in which he begs the Genzyme chief to meet with him:
I have been trying to engage with you regarding a potential acquisition for the past few months. As a consequence of your unwillingness even to meet with us, we sent you a detailed, written proposal on July 29, 2010. ...
We are disappointed that you rejected our proposal on August 11 without discussing its substance with us. After our repeated requests, you agreed only to let our respective financial advisors hold a meeting of limited scope. Our financial advisors finally met briefly on August 24, but the meeting simply served as further confirmation that as throughout you remain unwilling to have constructive discussions.
As I have mentioned to you, we are committed to a transaction with Genzyme, and, therefore, we feel we are left with no choice but to take our compelling proposal directly to your shareholders by making its terms public.Analysts seem to believe Sanofi will have to raise its bid a little bit in order to get its way, but given that it's the only company interested in Genzyme it begs the question, why bother? There's no other possible way that Genzyme's stock will rise above $69 in the next few years. Life is short. There's money on the table. Sanofi can walk away.
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