Over the weekend, French pharmaceutical firm Sanofi-Aventis (SNY) made its attempt to take over biotech firm Genzyme (GENZ) official. SNY offered $69 per GENZ share, which is slightly more than a dollar higher over GENZ's Friday close. The total value of the offer comes to $18.5 billion.Although the offer isn't much more than Friday's close, it is 38% higher than GENZ's July 1 close. This is when speculation cropped up about a potential buyout offer from SNY. GENZ turned down the offer, noting that SNY was undervaluing the company.
In fact, according to the Associated Press, GENZ's CEO told SNY that GENZ's board is "not prepared to engage" in negotiations with an "unrealistic" starting price. SNY is trying to take advantage of some problems GENZ has had with the manufacturing of Cerezyme and Fabrazyme -- two of the company's key drugs.
SNY's problem is that shares of GENZ have recovered from their own problem. This sure makes it look like SNY is trying to swoop in and acquire GENZ at an unfairly valued price, but that wasn't the case. Comparing the price to the July 1 offer, SNY brought a good offer to the table. The good news for GENZ is that it had confidence in its ability to emerge from its problems, and the confidence has paid off.
In pre-market trading GENZ has advanced past the $70 level. Considering GENZ told SNY that the offer was an "opportunistic takeover proposal," I don't see the deal going through anytime soon. Of course, it was the rumor of SNY's takeover that helped push GENZ higher.
Reader Comments (Page 1 of 1)
8-30-2010 @ 4:43PM
raj said...
I was thinking, with a huge downturn in the market imminent, a Sanofi bid for Genzyme is premature, the same as it would be premature for anyone to buy a house in the US right now. A couple economic charts gave me some perspective:
GENZ vs S&P 500
http://www.hiddenlevers.com/hl/u?aULDml
Here you can see a high correlation during the mid 2000s bounce back. But Genzyme didn’t careen to earth like the S&P did in 2008-09. Sanofi Aventis may think GENZ will defy gravity again, and put a bid in. If we return to the lows on the S&P, then GENZ might be good insurance.
Sanofi-Aventis vs USD index
http://www.hiddenlevers.com/hl/u?bmvEpU
Here you can see SNY (ADR) has had a roughly inverse correlation to the US dollar. As the markets retrench further on the way to the March 2009 lows, there will be a flight to US dollars, and ostensibly SNY will go down and not have the strength to put a bid in.
So a few visuals tell us why Sanofi targeted Genzyme, and the timing for their bid. Economics Jai Ho!