Another Voice Heard in the Genzyme-Bioenvision Takeover Debate: Elliot Associates is “Extremely Dissatisfied”

9/6/07

Shareholders of New York-based Bioenvision (NASDAQ: BIVN) have yet to vote on Genzyme’s (NASDAQ: GENZ) much-maligned $5.60-per-share offer for the firm, but one of them is making its intentions clear now. In a scathing letter to the Bioenvision board dated yesterday, Hedge fund Elliott Associates wrote that it is “extremely dissatisfied with the proposed Genzyme transaction” and will not vote for it.

In the letter, Elliott said that it and its sister fund, Elliott International, own approximately 6.7 percent of Bioenvision’s common stock. In fact, a recent SEC filing shows that Elliott has been squirreling away Bioenvision shares throughout the summer—with significant purchases after Genzyme announced its takeover bid.

Elliott has a reputation for activist fund management, and has previously locked horns with the likes of Procter and Gamble to the benefit of small investors. That should offer some encouragement to the common stockholders who have argued all along that the $5.60 price tag isn’t fair; a majority refused to tender shares under Genzyme’s original offer, which closed on July 10. Indeed, the “outrageously low valuation at which Genzyme is attempting to appropriate Bioenvision” is one of the key objections raised in Elliott’s letter to the Bioenvision board, which cites price targets for the firm ranging up to $13.

The hedge fund also points to apparent conflicts of interest at play in the deal, given that “directors associated with Perseus-Soros, the Company’s largest shareholder and an eager seller of stock, were intimately involved in the sale process.” The letter continues: “In our opinion, it would not be an exaggeration to state that this sale process had a greater resemblance to a ‘fire sale’ than an auction. With substantial cash in the bank, a growing revenue stream, a currently approved and highly promising product, and positive catalysts around the corner, the (unconflicted) Board members had absolutely no need to rush to sell the Company, let alone to hurriedly accept such an inadequate offer.”

Elliott made clear, however that it was not opposed to the idea of a Bioenvision sale to Genzyme “at a fair valuation.” All in all, its sentiments mirror those expressed by another large minority shareholder, New York’s SCO Capital, which has also filed several letters with the SEC registering its opposition to Genzyme’s bid. Its latest filing, in July, called for revocation of Genzyme’s North American rights to the Bioenvision leukemia drug clofarabine.

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  • Dice K

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