France's Sanofi-Aventis on Monday launched an $18.5 billion hostile takeover offer for Genzyme Corp., stepping up its effort to capture the U.S. biotech company's promising drugs for high cholesterol and lucrative treatments for rare genetic disorders.
At $69 per share, the offer for Genzyme, based in Cambridge, Massachusetts, is unchanged from a friendly bid that Sanofi-Aventis made privately to management in July and publicly disclosed in August, only to be rejected.
It's the biggest hostile takeover in the pharmaceutical industry since Roche Holding's 2008 acquisition of Genentech for $47 billion, according to Dealogic, which analyzes mergers and acquisitions.
Sanofi-Aventis CEO Chris Viehbacher, on a conference call with reporters, said he decided to go straight to shareholders because Genzyme management "refused to engage in constructive discussions" despite several attempts by Sanofi-Aventis.
The offer to Genzyme shareholders opens Monday and runs to Dec. 10. Viehbacher said he has met with shareholders holding more than 50 percent of Genzyme's capital and that he is "confident the offer will be successful."
Viehbacher said Genzyme shareholders "are frustrated by Genzyme's unwillingness to engage in constructive discussions with us."
In a letter sent Monday to Genzyme CEO Henri Termeer and released by Sanofi-Aventis, Viehbacher said Termeer's "refusal to engage with us in a constructive manner is denying your shareholders an opportunity to receive a substantial premium, to realize immediate liquidity, and to protect against the risks associated with Genzyme's business and operations."
He said Sanofi-Aventis' offer represented a "significant premium" of 38 percent over Genzyme's share price before speculation over a possible deal surfaced in July.
Viehbacher met with Termeer on Sept. 20 but was unable to persuade him of the deal's merits.
Nathalie Ducoudret, a spokeswoman for Genzyme in France, declined to comment. Genzyme spokespeople in Cambridge couldn't be reached for comment.
In August, Genzyme said the $69 per share offer undervalued the company and that Genzyme's board was "not prepared to engage" in negotiations with an "unrealistic" starting price.
Last week Termeer said that a fairer value for Genzyme shares would be closer to $80, its price before the 2008 financial crisis and the company's subsequent manufacturing problems.
"They have to recognize our value rather than be opportunistic," Termeer was quoted as saying in the Financial Times.
Genzyme is considered attractive because it has promising drugs for high cholesterol and other disorders in late development, and it already sells some lucrative drugs for rare genetic disorders. That's a hot niche as big pharmaceutical companies diversify beyond blockbuster pills that get slammed by cheaper generic rivals after several years. The company just received U.S. approval in late May for a new drug for Pompe disease, and its experimental biologic drug for multiple sclerosis is getting expedited review by the Food and Drug Administration.
Genzyme reported a sharp drop in second-quarter profit because of falling sales and charges partly linked to manufacturing problems. Sales of two key drugs — Cerezyme and Fabrazyme — plunged because of viral contamination at a Genzyme facility in Allston, Massachusetts, causing the company to halt production and leading to inventory shortfalls.
Genzyme announced in May that it had agreed to pay a $175 million penalty to federal regulators, and is mapping out a plan for overhauling the plant. In the meantime, it has switched production to other plants.
Sanofi-Aventis shares dropped 0.6 percent at the open in Paris to 48 euros ($65.88).
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