Genzyme Corporation (NASDAQ: GENZ) is getting closer to capitulating to the offer to be acquired by Sanofi-Aventis (NYSE: SNY). At issue this morning is that Genzyme has agreed to open its books to Sanofi-Aventis. The two companies entered into a non-disclosure agreement that will keep data on manufacturing, margins, customer lists, and trade secrets out of the public domain. The real goal seems to be get closer to $80.00 per share. That may be possible, with some severe caveats.
Sanofi’s first formal offer of $69.00 was made back on August 29, 2010, and the company then took the tender off directly to Genzyme shareholders in early-October after Genzyme’s management team turned the offer down as being too-low and opportunistic. While some progress has been claimed, the general consensus is that Genzyme has been holding any details too close to the vest to draw a higher bid from Sanofi-Aventis. While the company was open to higher offers, no other bidders have emerged and the consensus inside the board room at Genzyme has been that $69 does not represent a point to even begin negotiations.
There is still no certainty that a pact will be reached. There have been discussions about contingency performance payments that could sweeten the merger terms in a contingent value right. Other potential terms have also been talked about without anything formal coming higher yet.
An agreement to enter a confidentiality pact helps in the thought of a merger. Genzyme will now allow Sanofi-Aventis to look at its cost structure and pricing, profit margins, supplier and customer pacts, supply contracts, customer orders, enhanced manufacturing plans, financial projections, marketing plans, and strategic alliances. Sanofi-Aventis has also agreed to a non-solicitation pact for Genzyme employees for at least 12 months for those employees encountered during the evaluation period.
Here is our prediction: a price of $72 will be offered and the final agreement may come to $75.00, with another $5.00 to $10.00 per shares potentially via a contingent value right. Deals like this are not routine when it comes to large public companies, but they are not without precedent.
Genzyme shares are up 2.5% at $72.87 and the stock hit a new 52-week high of $73.46. If you go back to 2008 before the bear market came into full swing, Genzyme shares briefly touched $80.00. Our take is that CEO Henri Termeer wants to deliver every single shareholder a gain as the capstone to his career in building Genzyme into a global biotech giant.
JON C. OGG