Sanofi CEO: Genzyme is 'Stonewalling'

CAMBRIDGE, Mass. (TheStreet) -- Genzyme(GENZ) has rejected Sanofi-Aventis'(SNY) $18.5 billion takeover offer, prompting Sanofi's chief executive to accuse Genzyme's management of "stonewalling" negotiations and having "unrealistic" expectations about the biotech company's value.

"The Genzyme board is now in receipt of your second unsolicited letter proposing to acquire the company for $69 per share in cash," the Genzyme board said in a press release issued Monday morning. "This letter, received yesterday, is identical to last month's offer. It provides no new information and no improvement in price, and therefore fails to establish a basis for engagement by the Genzyme board."

Genzyme added that Sanofi's bid didn't recognize the company's significant progress in rectifying its manufacturing challenges and the potential for its new-product pipeline, most notably the experimental multiple sclerosis drug Campath.

Investors, however, are viewing Sanofi's public declaration of interest in Genzyme as a sign that a deal could get done, whether on friendly terms or through more hostile alternatives. Genzyme shares rose 3.5% to $69.96 in early Monday trading.

On Sunday, Sanofi-Aventis took its offer for Genzyme public, saying it had already submitted a non-binding proposal for Genzyme and secured financing for the offer. Under the terms of the proposed acquisition, Genzyme shareholders would receive $69 for every Genzyme share in cash, representing a 38% premium over Genzyme's share price of $49.86 on July 1.

On a conference call Monday, Sanofi CEO Chris Viehbacher insisted that the $69 per share offer represented a significant premium for Genzyme shareholders, especially for a company that, in his words, has "significantly under-performed for a number of years, and not just because of the recent manufacturing issues."

Sanofi's preference is to negotiate a friendly takeover of Genzyme, but the company is prepared to consider all alternatives, said Viehbacher, suggesting that Sanofi intends to take its offer directly to Genzyme shareholders if management refuses to negotiate.

Sources close to Genzyme have said the company is holding out for a higher Sanofi bid -- roughly in the $75 to $80 a share range -- before agreeing to enter into formal takeover talks.

According to Reuters, analysts on average have been predicting a final offer price of $77.90 a share.

Sanofi is also under pressure not to overbid for fear of over-paying for Genzyme, especially if the biotech company's well-known drug manufacturing issues cannot be corrected in a timely fashion. On Monday's conference call, Viehbacher said Sanofi planned to remain "disciplined" in its entreaties toward Genzyme.