France's Sanofi-Aventis is expected to bid up to $18.7 billion for Genzyme Corp by the weekend, but an offer at that price is not likely to sway the U.S. biotech company, sources said on Thursday.

Sanofi plans to send a so-called bear hug letter to Genzyme within 72 hours outlining the terms of its offer, to put pressure on the company to open negotiations, said one source familiar with the matter, who declined to be named. The source was not authorized to speak with the media.

Sanofi's board has authorized a bid of up to $18.7 billion, or $70 per share, sources familiar with the matter told Reuters on Wednesday.

While a bear hug offer is technically a friendly overture, it is often a signal that a company might go hostile and take an offer directly to a target's shareholders.

Genzyme , however, may not respond favorably to Sanofi's offer since its stock already has surged more than 30 percent since reports of takeover interest emerged last week. The stock traded at $69.90, up $1.90, or 2.8 percent in afternoon trading on Thursday.

Genzyme shareholders are unlikely to accept a figure lower than $75 a share and are more likely to demand something in the $80's, a second source said.

Sanofi has funding commitments that would allow it to raise its bid above $70 per share, a source previously told Reuters. It was unclear, though, how high Sanofi's board would go to win the hand of Genzyme, which specializes in treatments for rare genetic diseases.

Fundamentally, we estimate that Genzyme stock is worth $58 per share, but the stock may trade on a takeover basis and we view $73 as a reasonable price, said Lazard Capital Markets analyst William Tanner.


The news of the expected bid came as Sanofi posted forecast-beating results. Sanofi Chief Executive Chris Viehbacher said the company would look at opportunities to grow through acquisition as the company faces the loss of patent protection on key drugs in the next three years.

It's absolutely important that these things drive value, Viehbacher said on a conference call, without making a specific comment on Genzyme. The key thing we're looking for is sustainable growth and (to) reduce dependence on patents.

Viehbacher said Sanofi would remain disciplined in its merger and acquisition strategy, making small to mid-sized acquisitions of up to $20 billion. Still, he didn't rule out the possibility of a bigger move.

We are obviously opportunistic; the group has the financial muscle, Viehbacher said.

Sanofi is being advised by Evercore Partners and has lined up funding commitments from JPMorgan and BNP Paribas , sources said. Genzyme is being advised by Goldman Sachs and Credit Suisse , sources said.


Buying Genzyme would be Sanofi's largest deal since 2001 and Viehbacher's biggest move since he became CEO in late 2008.

A big move could be in the cards as more than a fifth of its 2008 drug sales -- excluding the sooner-than-expected generic threat to its blood thinner Lovenox -- face patent expiries to 2013. Its drug portfolio can't offset that loss.

Last year, Sanofi invested 6.6 billion euros in 33 new partnerships and acquisitions and has said it would do a similar number of deals this year to further branch out its business and address unmet medical needs.

Sanofi's second-quarter earnings exceeded expectations, thanks to tightened spending and demand for its diabetes drugs, growth in emerging markets and a weaker euro.

Business net income rose 7.6 percent to 2.48 billion euros ($3.22 billion) versus an average forecast of 2.32 billion euros, based on a Reuters poll. Earnings per share climbed 8 percent to 1.90 euros versus a forecast 1.78 euros.

Sales increased 4.6 percent to 7.78 billion euros even as competition grew from generic copies of blood thinner Plavix and cancer drug Eloxatin, and as vaccine sales declined.

The U.S. health regulator's approval of a generic competitor to blood thinner Lovenox led Sanofi last week to cut its 2010 earnings per share forecast to between stable and 4 percent lower at constant exchange rates from 2 percent to 5 percent growth against 2009.

Sanofi expects 2013 sales to reach at least 2008's level of 27.57 billion euros, and business net income to be similar to the 2008 level of 7.314 billion euros.

Overall, a solid quarter, but with uncertainty over a potential Genzyme acquisition, the stock may languish, Bernstein analysts wrote in a research note, rating Sanofi shares market perform with target price of 61 euros.

Sanofi shares are down about 17.5 percent this year versus a 1.9 percent dip in the STXE 600 European health index <.SXDP>. On Thursday, Sanofi fell 1.3 percent in Paris.

($1=.7684 Euro)

(Reporting by Jessica Hall, Caroline Jacobs, Noelle Mennella, and Toni Clarke; Editing by Michele Gershberg, Gerald E. McCormick, Gunna Dickson and Steve Orlofsky)