PARIS/BOSTON (Reuters) – U.S. biotech group Genzyme rejected an $18.5 billion takeover proposal by French drugmaker Sanofi-Aventis on Monday, setting up what could be a protracted battle.
Genzyme Chief Executive Henri Termeer told Sanofi CEO Chris Viehbacher in a letter his proposal of $69 a share -- made public a day earlier -- dramatically undervalued the U.S. company and did not justify entering talks.
Viehbacher, dubbed the "Smiling Killer" by some staff for his cost-cutting zeal, hit back on a conference call with investors and analysts.
"We are putting $18.5 billion on the table and that's not being taken seriously," Viehbacher said. "The number of players who can mobilize $18.5 billion in cash for Genzyme is pretty limited."
Viehbacher said he did not expect the process to conclude quickly and said he was in no hurry, but hinted that if Genzyme did not enter talks and open its books, Sanofi could take a hostile offer directly to shareholders.
Sanofi wants to buy Genzyme, a leading maker of drugs for rare diseases, to fuel sales growth as some of its drugs lose patent protection. Sanofi shares have lost 18 percent this year, while the European healthcare sector is up 3 percent.
Viehbacher said the transaction was "not large" and would not require it to raise fresh capital or put its credit ratings and dividend policy at risk. He also pointed to significant cost savings and a boost to earnings and revenue.
"They could be obliged to slightly increase the offer in order to have important shareholders' approval," said CM-CIC Securities analyst Arsene Guekam. "For me, it's the first price. Now (Genzyme) management is forced to engage in a dialogue with Sanofi. Even if they say 'no' they have to justify why."
Sanofi confirmed its $69 per share non-binding cash offer for Genzyme on Sunday, publishing a letter sent last month to Genzyme's CEO after several failed attempts to start talks. Viehbacher said Genzyme was stonewalling.
Genzyme published Termeer's response to Viehbacher on Monday saying: "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 said its board unanimously rejected Sanofi's offer. It pointed out the board includes representatives of major investors, an apparent reference to activist shareholders Relational Investors and Carl Icahn, which hold 3.8 percent and 4.9 percent of Genzyme, respectively.
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.
Genzyme shares rose 3.8 percent to $70.20 by 1615 GMT in New York. Sanofi shares closed up 0.7 percent at 45.56 euros, in line with the Stoxx 600 European health care index.
Viehbacher said Genzyme shareholders now faced the choice between continuing to bet on management, taking the Sanofi premium or betting an unknown company would enter the fray.
"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," Jefferies International analysts wrote.
"There now seems to be a greater possibility of Sanofi-Aventis going hostile."
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.
"I don't think there is a white knight out there. I think this is the only offer Genzyme shareholders will see," said Navid Malik, an analyst at Matrix Corporate Capital in London, adding that Genzyme stock would drop below $60 without the deal.
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.
(Additional reporting by Ben Hirschler in Stockholm)
(Writing by James Regan; Editing by Michael Shields and Erica Billingham)
BUDAPEST (Reuters) – Hungary's Prime Minister Viktor Orban said on Monday that it was in the country's interest to sign loan agreements with the IMF if necessary but it was not in the country's interest to have economic policy agreements with the Fund.
According to a video of part of a speech posted on local news site Index.hu, Orban -- speaking to ambassadors -- said Hungary needed to pursue a more pro-active foreign policy.
On Hungary's relations with the IMF Orban said: "We interpret our agreement with the IMF -- our participation in the IMF's system of cooperation -- as a borrowing agreement. The IMF sees it as an economic policy agreement. This is not in our interest," Orban said.
"The Hungarian interest is that if necessary we should make loan agreements with the IMF on a regular basis. It is not in our interest to sign economic policy agreements with the IMF, as that unnecessarily limits the room of maneuver of ... the Hungarian government, Hungarian parliament and lawmakers."
(Reporting by Krisztina Than; Editing by Susan Fenton)
NEW YORK – In another sign that borrowers have taken tighter control of their debt, late payments on auto loans dropped in the second quarter.
The rate of payments 60 days or more past due dropped to 0.53 percent of outstanding auto loans in the April-to-June period, from 0.73 percent a year ago, according to credit reporting agency TransUnion.
The drop in the auto loan delinquency rate mirrors declines in late credit card and mortgage payments, according to TransUnion's review of 27 million credit reports in its database. Its records represent about 10 percent of the population with active credit accounts.
Meanwhile, new loans written during the quarter rose 18.7 percent, TransUnion said. And the average size of an auto loan edged up slightly, to $12,643 from $12,560 a year ago.
The change reflects an uptick in car purchases, said Peter Turek, automotive vice president in TransUnion's financial services group. Although the number of new loans hasn't returned to pre-recession levels, he said the increase in originations means that buyers are taking advantage of automakers' aggressive sales promotions.
"Consumers are very savvy, and they're recognizing good deals when they see them," Turek said. Buyers are also leaning more toward used cars over new cars, he said.
The delinquency rate rose in only three states: Rhode Island, where it reached 0.74 percent; Utah, at 0.71 percent; and Montana, at 0.38 percent. Overall, rates were below the national average in 28 states and Washington, D.C.
"The data definitely supports the fact that lenders are putting lower (numbers of) risky loans on the books," Turek said.
As with credit cards and mortgages, North Dakota has the best payment record, with a delinquency rate of just 0.28 percent. Mississippi has the highest delinquency rate, at 1.05 percent.
The lingering effects of the recession are likely playing out in some regions, Turek said, because auto loan payments are more closely correlated with unemployment than other borrowing like credit cards, which consumers typically treat as a higher priority.
Mainly because of seasonal patterns, TransUnion expects the auto delinquency rate to tick up to about 0.6 percent by the end of the year. Delinquency rates on auto loans tend to fall in the first half of the year and remain flat or rise later in the year.
The figure remains still slightly higher than the historical norm. Turek said auto sales will have to return to more normal levels — about 16 million cars per year from roughly 11 million now — for the delinquency rate to fall further.