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SCENARIOS-Will Sanofi snare Genzyme?

By Caroline Jacobs and Noelle Mennella PARIS, Nov 12 (Reuters) - French drugmaker Sanofi-Aventis this week urged unwilling bid target Genzyme to forswear anti-takeover tactics and let shareholders decide on its $18.5 billion hostile bid. Investors in the U.S rare-disease specialist have until Dec. 10 to tender their shares into Sanofi's all-cash, $69-a-share offer. What are the possible outcomes? THE COMPANIES ENTER TALKS This is possible if Sanofi raises its bid. Alternatively, Genzyme shareholders could pressure the board to talk if they believe Sanofi will walk away and no rival suitor will emerge. But both chief executives appear to have dug in their heels. Sanofi CEO Chris Viehbacher says he sees no reason to improve the offer as long as Genzyme refuses to talk about valuation, while Genzyme boss Henri Termeer will only talk if Sanofi sweetens its bid. And when the two met in September, Genzyme would not specify an appropriate price. Most analysts say Sanofi will have to raise the bid, and a Reuters poll in August suggested $78 a share could succeed. "Sanofi ... needs to be a bit more of a man about this and put a few more dollars on the table to get talks going," said a U.S. hedge-fund manager who owns Genzyme shares. But when? With no rival in sight, Sanofi could easily wait until the offer expires, some say. "I'd not be surprised if they let it lapse," Berenberg analyst Alistair Campbell said. "They will play hardball." Others, however, expect Sanofi to raise its offer before Dec. 10 or risk being usurped by a rival bidder, especially if Genzyme makes fast progress in resolving manufacturing problems that have bedevilled it, or receives more positive data on Campath, a multiple sclerosis treatment in its drug pipeline. Another London analyst said Sanofi was most likely to raise the bid days before the tender expired. "There are too many moving parts," the analyst said.

"Sanofi could suddenly find it is no longer in the driver's seat." TAKE THE FIGHT TO GENZYME'S AGM IN MAY Sanofi says it is in no rush and will take things one step at a time, leaving all options open. This suggests it could keep extending its offer until Genzyme's 13-member board faces re-election at May's AGM. It could then present its own nominees for election, in a so-called "proxy contest". But this could be stymied by Massachusetts takeover rules, which allow Genzyme to adopt a "staggered board", so only a third of directors could be changed next year. Viehbacher has urged Termeer not to take measures like this that sideline shareholders. SANOFI COULD WALK AWAY So far Viehbacher has ruled out walking away. "We are not going anywhere," he said when the hostile bid was launched on Oct. 4. "I think it would be a real shame to have to walk away. All options are on the table, but, again, we are extremely committed to this transaction." But Massachusetts takeover law could force Sanofi to abandon its pursuit, no matter how many shares it holds, if it can't get Genzyme board backing. Alternatively, Sanofi might give up if key shareholders such as Carl Icahn and Ralph Whitworth demand too high a price, or if it decides Genzyme's manufacturing difficulties are too risky. It could then look at another medium-sized company such as Shire, Allergan or Biogen to expand its pipeline. But some of these may be even more costly, and small deals might not fill the hole left by Sanofi's upcoming welter of patent expiries. A "WHITE KNIGHT" THIRD-PARTY BIDDER COULD EMERGE Other drugmakers have had since July, when Sanofi's interest first surfaced, to consider Genzyme, but none have come forward. Genzyme said it would explore alternatives, including contacting other companies, but that has not brought up a third party. Johnson & Johnson and Pfizer have been mentioned, but analysts say it is unlikely they would bid. (Editing by Quentin Webb and Will Waterman) Keywords: SANOFI AVENTIS/ (paris.equities@news.reuters.com; Reuters Messaging: caroline.jacobs.reuters.com@reuters.net; +33 1 49 49 53 43) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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