Sanofi-Aventis's Tender Offer for Genzyme

Abstract

In October 2010, Henri Termeer, the chairman and CEO of Genzyme, received a letter from the CEO of Sanofi-Aventis announcing its intention to commence a tender offer for Genzyme. Termeer thought the offer undervalued Genzyme, given the number of promising new drugs in the company's pipeline and the success of its current drug portfolio. The case focuses on the strategic and financial considerations of a large corporate acquisition. To estimate Genzyme's fundamental value, students must conduct a discounted cash flow and other valuation analyses. This case is designed to be part of a firm-valuation module within either a first-year MBA principles course or a second-year MBA elective; it can also be taught to executives who have M&A experience and can bring extra insights regarding the strategic fit and leadership issues. Excerpt UVA-F-1716 Rev. Jun. 21, 2018 Sanofi-Aventis's Tender Offer for Genzyme On the foggy morning of October 5, 2010, Henri Termeer, the chairman and CEO of Genzyme Corporation, drove to the firm's headquarters in Cambridge, Massachusetts. Termeer usually spent his early mornings working from the indoor garden on top of the building, but on that day he went straight to his office, grabbing a cup of coffee on his way. One thing was on his mind—the letter he had received from the CEO of Sanofi-Aventis (Sanofi) announcing the company's intention to commence a tender offer for Genzyme (Exhibit 1). Termeer had been Genzyme's CEO for more than 25 years, leading the company through its growth from an entrepreneurial venture to one of the country's top five biotechnology firms. Yet the past two years had presented a significant test. Genzyme was just recovering from an unexpected contamination in 2009 at its major production facility in Allston, Massachusetts, which had led to shutting down the plant and limiting the supply of life-sustaining drugs for Genzyme's patients. As a result of the economic and reputational damages, the company's stock had plummeted, before rebounding as a result of the news of the tender offer (Exhibit2). When compared to the industry and the overall stock market during the previous decade, however, the stock had performed very well (Exhibit 3). The recent downturn in the stock price had attracted activist investors, which resulted in Genzyme entering into a cooperation agreement with Relational Investors and subsequently fending off a proxy battle with Carl Icahn. But Termeer fully understood that together the two activists controlled a substantive position of Genzyme shares and wanted to exit their positions at a gain (Exhibit 4). Sanofi, the leading French pharmaceutical company, had approached Genzyme as a potential acquisition at the start of the summer. After a few rounds of negotiating, Termeer and his board publicly rejected Sanofi's cash offer of $ 69 per share on August 29, 2010. The letter from Sanofi's CEO conveyed frustration with Termeer's unwillingness “to engage in constructive discussions” (Exhibit 1) and announced that Sanofi would be circumventing Termeer by taking the $ 69 tender offer directly to Genzyme's shareholders. . . .