The Sanofi-Aventis (NYSE: SNY) acquisition attempt of Genzyme Corp. (NASDAQ: GENZ) is taking a turn in a strange direction.  The company is holding out for more than the $69.00 cash offer on the table, and Sanofi-Aventis did come back with a different off.  The interesting part is that it is for no more money.  Sanofi is turning hostile and is taking the $69 bid directly to shareholders.

Sanofi announced that it has commenced a tender offer for all of the outstanding shares of Genzyme’s common shares for $69.00 per share.  The offer is scheduled to expire at 11:59 PM EST on December 10, 2010.  The company noted that Genzyme’s board of directors and its management team’s have continued to refuse entering constructive discussions.

We now know that at least some discussions have taken place as Sanofi noted, “A meeting between the two CEOs on September 20, 2010, proved unproductive, despite several attempts by Sanofi-aventis to advance discussions.”

Sanofi-aventis also said that its executives have recently met with Genzyme shareholders who collectively own more than 50% of the outstanding shares and it noted that those shareholders were frustrated with Genzyme’s persistent refusal to have meaningful discussions regarding sanofi-aventis’ proposal.

Here is what Sanofi claims for premiums in a deal: “The Sanofi-aventis tender offer represents a premium of 38% over Genzyme’s unaffected share price of $49.86 on July 1, 2010.  Sanofi-aventis’ offer also represents a premium of almost 31% over the one-month historical average share price through July 22, 2010, the day prior to press speculation that sanofi-aventis had made an approach to acquire Genzyme.”

What is interesting here is that the entire process seems to have led us to believe that Genzyme management was completely discounting its recent woes and that it was holding out for something closer to $80 where it had briefly traded before.  The problem is that it was long ago, and Genzyme is just not worth this much on its own now.  Otherwise shares would have been up around $70 rather than down close to $50…

Genzyme closed at $70.88 on Friday and the 52-week trading range is $45.39 to $71.99.  Henri Termeer is taking a risk here.  It seems as though there are just no other bidders, and now it seems that Sanofi-Aventis feels that its $69.00 offer is about all it wants to pay if the board of Genzyme is not going to go along with a deal.  Holding out and risking $15 to $20 per share in takeover gains is not worth management wanting an extra $1 or $2 per share.  The odds of this turning into a $75 or $80 offer do not seem favorable.

As noted before, playing chicken is a dangerous game in cars that often leads to fatalities.  It is often little different in mergers.  Shareholders can sell their Genzyme shares for a  premium to the deal today as they have been able to do so for a while.  Those holders who are holding out for more are betting Henri Termeer can pull a rabbit out of his hat.  That is a risk that many should remember where Genzyme was before the bid rumors started.

JON C. OGG

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