Genzyme Rejects Sanofi-Aventis Takeover Bid

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Genzyme (GENZ) has turned down a buyout offer from French drugmaker Sanofi-Aventis (SNY), saying that the Oct. 4 bid of $69 per share -- or $18.5 billion -- "dramatically undervalues" it. The company is worth about 30% more, Genzyme CEO Henri Termeer said in a statement Friday.

While Sanofi-Aventis based its offer partly on analysts' earnings expectations, offering a price of 20 times the average earnings estimate, Genzyme on Friday said it expects higher 2011 earnings of $4.30 to $4.60 per share. The midpoint of that guidance, $4.45, multiplied by 20 equals $89 per share. Sanofi-Aventis's offer also doesn't take into account the company's increased share price, cost-cutting measures, product pipeline and growing sales and profit expectations, according to Genzyme's statement.

"Our board is unanimous in its view that the Sanofi-Aventis offer does not approach the real value of the company, nor does it reflect our financial recovery, the achievement of manufacturing and product-supply milestones, and the increasingly recognized commercial potential for alemtuzumab," Termeer said. The company's board rejected the Sanofi bid Oct. 7.

Earlier this week, Cambridge, Mass.-based Genzyme reported third-quarter net income that quadrupled from a year earlier to $69 million. Genzyme estimated Friday that it will triple earnings next year while growing its revenue about 25%.

Genzyme specializes in creating drugs for rare diseases. For example, it makes leukemia treatment alemtuzumab, as well as drugs that treat multiple sclerosis. Genzyme holds considerable appeal for a company like Sanofi-Aventis because five of Sanofi's eight best-selling drugs will lose their patent protection and face generic competition by 2012.

Genzyme shares rose 0.68% to close at $72.45 on Friday.

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