The proposed merger and acquisition of Genzyme Corporation (NASDAQ: GENZ) by Sanofi-Aventis (NYSE: SNY) is about to get interesting.  There is a building collective thought that a higher bid price than $69.00 in cash is coming the way of Genzyme holders.  The question is whether it is enough, followed by Genzyme’s questionable response so far and other key issues.

Earlier this week came a report from the WSJ that Sanofi was lining up additional financing as it considered a higher bid.  Now this morning come reports from Bloomberg that Sanofi is preparing to raise the $69.00 cash offer by maybe $1.00 or $2.00 per share.  Today’s report also noted that Sanofi officials are set to meet later this week to discuss how they will proceed on this effort.

There is just one problem, well several problems.  Genzyme shares are $2.50 above the existing $69.00 cash per share offer already on the table.  The 52-week trading range is $45.39 to $71.99.  In short, the investing community has Genzyme at top-dollar right now.  Another consideration is that other bidders have not emerged as originally hoped.  Lastly, it seems that Henri Termeer and management were still able to remember when the stock was above $80.00 at all-time highs.

Holding out for a higher bid is one thing.  Risking $10.00 to $15.00 per share, which was the original projection of what the stock could fall if this deal was canceled after due diligence, for an extra $1.00 or $2.00 per share is not really a good job by management of Genzyme.  Genzyme either needs to do a meet and greet or it needs to say that shareholders will be better off in the long-term by not accepting the buyout offer.  Whether the shareholders would agree is an unknown, but it is a strategy nonetheless.

Genzyme shares are indicated marginally higher this morning.  There are risks here that still exist in this bidding process.  There is already an arb-premium in the deal.  Shareholders can dump now and effectively be selling at 52-week highs.  If another bid was going to emerge, then common sense would dictate that it would have already been made by a rival.

Playing chicken in cars is a dangerous game, often fatal for those involved.  Playing chicken in mergers is almost as dangerous.

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JON C. OGG

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