Sunday, August 29, 2010

Sanofi Offers To Buy Genzyme

I guess general economic worries aren't slowing down merger mania, at least not yet.  There's big action coming in Big Pharma:

Sanofi-Aventis SA said it is offering to buy Genzyme Corp. for $69 a share, or about $18.5 billion in cash.

Cash bids are always nice to see.  Paying $69 per share for GENZ isn't much of a premium over last Friday's closing price of $67.62, so perhaps Sanofi-Aventis isn't expecting any competing bidders. 

A quick glance at GENZ's stats shows an enterprise value very close to its market value.  Bidders often go for a target whose enterprise value is far below its market cap.  Its ROE and EPS are both currently negative, so Sanofi-Aventis may see some hidden value here that's lost in the fundamentals.  Paying 20x EPS is a heck of a premium when your earnings have gone negative for two quarters.  Does GENZ have something in its pipeline that can help Sanofi regain ground lost to generics?  Time will tell. 

Full disclosure:  Anthony J. Alfidi has no position in any company discussed in this post.