Sanofi is after Genzyme for a few months now, with no avail. Genzyme just won’t sell. Sanofi today began a hostile takeover to buy Genzyme. The hostile takeover values the company at $18.5 billion, or $69 per share, the same price that Sanofi offered to Genzyme back in August, but the latter, of course, spurned, claiming the company is worth more. But how much more is it worth?

Genzyme is losing money, it has an EPS of -30 cents, and the movement of the stock, at least for the last few months (since the Sanofi bid), does not reflect the performance of the company at all (it is only going up because of the Sanofi bid).

For Sanofi to stalk Genzyme for a few months and finally go for a hostile bid, this means it really wants it, and can pay the maximum amount that it can afford to acquire this company. So, in order to know the upper limit of GENZ, we need to know how much money Sanofi is willing to pay.

Let’s study some facts:

– Sanofi’s market capitalization is $86.4 billion, which makes the $18.5 billion they are willing to pay for Genzyme far from being peanut money (it is more than 20% than Sanofi’s market capitalization).
– SNY is way undervalued at a P/E of 10.5.
– Sanofi is making a lot of money, and is buying a company that is losing a lot of money.
– Sanofi has not raised the price in its aggressive bid, which means that its margin is not that high, and will probably can afford a few bucks extra to buy the stock.
– Sanofi’s bid of $69 is $2 lower than the $70.88 of the current GENZ price.

I think the price of the stock will go up substantially in today’s trading, at least 10%, which will probably be $10 higher than the Sanofi bid. The question remains, what will Sanofi do?

Again, clearly they want the company, and it seems that they are willing to fight for it until the end of the year, after that, investors from both sides will feel that this game is bigger than both companies…

We shall see. SNY is currently trading at $33.12 and GENZ is currently trading at $70.88.