DealZone

Deals wrap: Turning down Sanofi

August 30, 2010

A sign points the way to the headquarters of Genzyme in Cambridge, Massachusetts August 3, 2010.    REUTERS/Brian Snyder   Genzyme broke its five-week silence to reject an $18.5 billion takeover proposal by French drugmaker Sanofi-Aventis, dismissing it as opportunistic and too low. *View article *View Genzyme’s letter to Sanofi-Aventis

Intel will buy Infineon’s wireless unit for $1.4 billion, enabling the chipmaker to boost its presence in the smartphone market. This is the second major deal for Intel within two weeks after the company announced its $7.7 billion offer for McAfee on Aug 19. *View article

Is Cisco in deal talks with Skype? A TechCrunch source says Cisco has made an offer for the Internet phone services provider. Earlier this month, Skype filed for an IPO. *View article

3M said it agreed to buy Cogent for more than $900 million, paying a nearly 18 percent premium for the biometric identification systems company. 3M estimates the $4 billion biometric market will grow by 20 percent a year. *View article

Agrium said it would be interested in Potash Corp’s nitrogen and phosphates business, worth an estimated $12 billion, if miner BHP Billiton secures its $39 billion Potash takeover and decides to sell the assets. BHP Billiton says they have no plans to sell any Potash Corp assets. *View article *View article on BHP’s top deal maker, Alberto Calderon *View analysis on China’s growing appetite

If there were any questions about whether Frank Quattrone could successfully return to the frontline of investment banking after a five-year legal fight, they have been put to rest by his role in advising 3PAR. *View article

Websense is open to takeover bids after rival McAfee was snapped up by Intel. “In my experience the way that you position yourself for sale is not to go around saying, ‘I am for sale,’” Chief Executive Gene Hodges told Reuters. “It’s to win in the marketplace and make sure that potential suitors know what your unique assets are.” *View article

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I was thinking, with a huge downturn in the market imminent, a Sanofi bid for Genzyme is premature, the same as it would be premature for anyone to buy a house in the US right now. A couple economic charts gave me some perspective:

GENZ vs S&P 500
http://www.hiddenlevers.com/hl/u?aULDml

Here you can see a high correlation during the mid 2000s bounce back. But Genzyme didn’t careen to earth like the S&P did in 2008-09. Sanofi Aventis may think GENZ will defy gravity again, and put a bid in. If we return to the lows on the S&P, then GENZ might be good insurance.

Sanofi-Aventis vs USD index
http://www.hiddenlevers.com/hl/u?bmvEpU

Here you can see SNY (ADR) has had a roughly inverse correlation to the US dollar. As the markets retrench further on the way to the March 2009 lows, there will be a flight to US dollars, and ostensibly SNY will go down and not have the strength to put a bid in.

So a few visuals tell us why Sanofi targeted Genzyme, and the timing for their bid.

Economics Jai Ho!

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