U.S. biotech Genzyme broke its five-week silence to reject an $18.5 billion (11.9 billion pounds) takeover proposal by French drugmaker Sanofi-Aventis on Monday, dismissing it as opportunistic and too low.
Sanofi Chief Executive Chris Viehbacher confirmed his $69 per share non-binding cash offer for Genzyme on Sunday, hinting he could make a hostile takeover bid following several unsuccessful attempts to hold talks with Genzyme management.
Genzyme hit back on Monday, saying that Sanofi's proposal showed no improvement in price since Viehbacher first wrote to management in July and failed to form the basis for talks.
The Genzyme board is not prepared to engage in merger negotiations with Sanofi based upon an opportunistic proposal with an unrealistic starting price that dramatically undervalues the company, Genzyme CEO Henri Termeer said in a letter to Viehbacher published on Monday.
Sources previously told Reuters that Genzyme wants an offer of at least $75 per share before Sanofi could review its books. Some shareholders want as much as $80 a share to clinch a deal.
Genzyme said on Monday that Sanofi and its advisers claim Sanofi is willing to pay more but that the company is unwilling to bid against itself.
The French group stopped short of making a direct approach to Genzyme shareholders on Sunday, and Viehbacher sounded a conciliatory tone in an interview with Les Echos newspaper that nonetheless suggested there was a limit to his patience.
We want to show that we are determined and serious, without being threatening straightaway. Quite some time can go by yet, Viehbacher -- dubbed the Smiling Killer by some staff for his cost-cutting zeal -- said in the interview.
Genzyme shares were up 4.3 percent to $70.55 in pre-market trade in New York, following its rejection of Sanofi's offer.
Sanofi shares were up 0.9 percent at 45.655 euros, while the Stoxx 600 European health care index gained 0.7 percent.
Viehbacher said on Sunday that disclosing Sanofi's non-binding offer would give Genzyme shareholders a chance to see the significant shareholder value and compelling strategic fit inherent in a combination of the two companies.
There now seems to be a greater possibility of Sanofi-Aventis going hostile, Jefferies International analysts wrote.
We see Sanofi's tactics to date as being good, weakening the Genzyme shareholder base already by blowing hot and cold via the press on a potential acquisition in the absence of any visible counter-bidder.
Some analysts suggested Genzyme, which is trying to fix manufacturing problems that led to shortages of two of its top drugs and had hit its stock price, may not get a better offer and that a hostile bid by Sanofi could even be lower.
Roche Holding cut its bid to buy out shareholders in U.S. biotech Genentech in 2008 when it turned hostile after Genentech rejected a previous offer, although it subsequently sweetened its offer in 2009.
Sanofi realises these guys are in a corner and are thinking why should they pay over the odds?, said Navid Malik, an analyst at Matrix Corporate Capital in London.
We've not seen any white knights and if this offer doesn't go through we'll see the shares back well below $60. I don't think there is a white knight out there. I think this is the only offer Genzyme shareholders will see.
Analysts have said they expect a deal to be finalised in the range of $74 to $77 a share. If Sanofi walks away, analysts see shares of Genzyme falling to the low $50-range. Some say it could take at least a year for them to rebuild the lost value.
The Jefferies analysts saw a potential offer of $75 a share and said Sanofi may prefer the long game of waiting until Genzyme's annual meeting in May to let shareholders vote on a hostile bid.
Genzyme is the world's dominant supplier of drugs to treat Gaucher and Fabry disease -- rare, inherited disorders in which patients lack key enzymes for breaking down fats.
News of Sanofi's initial approach emerged late in July and the drugmaker sent a written expression of interest on July 29.
Sanofi said Genzyme rebuffed the offer on August 11 but after some persuasion agreed to a meeting of financial advisers on August 24.
(Additional reporting by Ben Hirschler in Stockholm)
(Writing by James Regan; Editing by Michael Shields and Erica Billingham)