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Sanofi CEO: Genzyme is 'Stonewalling'

Sanofi CEO has harsh words after Genzyme rejects $18.5 billion takeover offer.

CAMBRIDGE, Mass. (TheStreet) -- Genzyme (GENZ) has rejected Sanofi-Aventis' (SNY) - Get Sanofi Report $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


, 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.

Viehbacher was also critical of Genzyme management, including CEO Henri Termeer, for what he said was "stonewalling" by refusing to even meet to substantively discuss buyout terms.

Genzyme's "management has a history of over-promising and under-delivering," said Viehbacher, adding that Genzyme is being "unrealistic" if the company thinks it's worth much than Sanofi's $69-a-share offer.

Sanofi's offer represents a premium of almost 31% over the one-month historical average share price of Genzyme through July 22, the day before press speculation that Sanofi had made an approach to acquire Genzyme.

Sanofi said that based on analyst consensus estimates, the offer represents a multiple of 36 times Genzyme's 2010 earnings per share and 20 times its 2011 earnings per share.

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Last week, Genzyme announced that it has begun to increase the supply of Cerezyme for patients with Gaucher disease to near-normal levels, and that supplies of Fabrazyme for patients with Fabry disease will increase beginning in the fourth quarter.

Sanofi-Aventis shares were up 17 cents to $29.09 in early Monday trading.

--Written by Adam Feuerstein in Boston with contributions from Andrea Tse in New York.

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