In response to the hostile takeover bid launched by Sanofi Aventis (SNY), Genzyme Corp.’s (GENZ) Board of Directors once again rejected Sanofi’s proposal and urged shareholders to refrain from tendering their shares to Sanofi.
On Oct 4, Sanofi had launched a tender offer for all outstanding shares of Genzyme – the offer is scheduled to expire on Dec 10. Sanofi’s offer price stands at $69 per share with the entire deal being valued at $18.5 billion.
Offer Deemed Inadequate and Opportunistic
Genzyme called Sanofi’s offer inadequate and opportunistic. The company said that the offer significantly undervalues Genzyme and is not in the best interests of the company or its shareholders.
In a filing with the US Securities and Exchange Commission (SEC), Genzyme also said that at a meeting conducted on Sep 20, Sanofi had proposed a price range of $69 – $80 per share as the acquisition price. However, Genzyme did not commit itself to any price range.
The Board has also asked Genzyme’s management and advisors to explore and study alternative options for the company and its assets in order to understand the full value of the company. While this includes approaching third parties, the company specified that these evaluations do not mean that the company is up for sale.
We note that Genzyme is currently evaluating strategic alternatives for its diagnostic products and pharmaceutical intermediates businesses and intends to focus on its core business. In fact, Genzyme recently entered into an agreement with Laboratory Corporation of America Holdings (LH) for the sale of its genetic testing business for $925 million. The deal is scheduled to close by year-end.
Our Take
We currently have a Neutral recommendation on Sanofi, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Sanofi has a high exposure to generic risk on many of its leading franchises and is looking to create a new source of growth through its acquisition of Genzyme, which would boost Sanofi’s revenues as well as its pipeline.
We currently have a short-term Buy rating (Zacks #2 Rank) on Genzyme. The company’s shares received a major boost with Sanofi expressing an interest in acquiring the company. Meanwhile, we are pleased to see that the company is taking steps to emerge from the impact of the temporary shutdown of the Allston plant.
Longer-term, we remain Neutral on Genzyme. We believe that the company may have to face additional challenges before it is able to go back to a normal production and supply schedule. Moreover, the FDA’s consent decree could result in the company incurring additional costs in case of non-compliance.
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