Court Documents Detail Lead-Up to Genzyme’s Controversial Repurchase of its Biosurgery Division
Just-unsealed federal court documents detail the events leading up to Genzyme’s 2003 repurchase of its biosurgery division, the Boston Globe reports today on its front page. The deal was the subject of a class-action lawsuit filed by shareholders of the biosurgery division who alleged that Genzyme timed the transaction to undervalue the division; Genzyme settled the case last month for $64 million without admitting any wrongdoing.
Using court filings and company documents that until now were subject to a secrecy order, the Globe‘s Jeff Krasner reconstructs the details of Genzyme’s “secret two-year endeavor known internally as Project Eleanor, in which the company planned to buy the biosurgery shares at a bargain price.” Though the company denies any attempt to undervalue the shares (which were set up as a tracking stock in late 2000), it ultimately repurchased them at $1.77 apiece—despite the estimate of the biosurgery division’s head that they were worth between $12.75 and $75 per share.
Krasner recounts how things “quickly turned ugly” when Genzyme CEO Henri Termeer described the buyback deal in a May 2003 conference call: “When one analyst called the transaction ‘highly suspicious,’ Termeer bristled. ‘Genzyme is a $9 billion corporation, and we’re not going to play around with that kind of nonsense.’” The article also describes the plaintiffs’ allegations that Genzyme “disclosed bad news about the Biosurgery division while withholding good news” as part of an effort to drive the tracking stock’s price down.
A Genzyme spokesman said the company had settled the case a month ago and had no further comment at this time.