Investopedia: A Deal At Last For Sanofi And Genzyme

Ultimately it looks like two major drug companies are getting what they both think they need. After months of posturing, Sanofi-Aventis (NYSE:SNY) and Genzyme (Nasdaq:GENZ) found common ground on the value and structure of a deal, and Genzyme will become part of Sanofi. Though this deal was long in the making, only time will tell whether shareholders on both sides of the deal really benefit. 

The Deal

Sanofi-Aventis agreed to pay $74 a share in cash up front for Genzyme, a price that on its own virtually matches the all-time high set back in 2008. At that price, Sanofi is paying over four-times trailing revenue and over 26-times trailing EBITDA - a pretty generous premium compared to larger biotechs like Amgen (Nasdaq:AMGN) and Gilead (Nasdaq:GILD) as well as other growth names like Celgene (Nasdaq:CELG).

In response to charges of opportunism from Genzyme's management, Sanofi agreed to sweeten the pot with so-called contingent value rights (CVR). If Genzyme's business reaches certain milestones after the deal, Genzyme shareholders will get additional payments. There are six different hurdles laid out for Genzyme, worth up to $14 per share in total (or about $3.8 billion), but only the first three (production levels for Cerezyme, approval of Lemtrada and Lemtrada sales in excess of $400 million in certain territories) seem highly likely to be reached. If those three are reached, it will cost Sanofi about $4 per Genzyme share, while the remaining hurdles are all tied to ever-higher levels of sales. 

Please find the full piece here:
http://stocks.investopedia.com/stock-analysis/2011/A-Deal-At-Last-For-Sanofi-And-Genzyme-SNY-GENZ-AMGN-GILD-CELG-SHPGY-ISIS0218.aspx

Note: I realize how out of date this is now. My apologies for that ... I submitted it Wednesday morning, but it got held up in the queue.