Genzyme Agrees to Sell Genetics Unit to LabCorp for $925M
Cambridge, MA-based biotech powerhouse Genzyme (NASDAQ: GENZ) has struck a deal to sell its laboratory testing unit to Laboratory Corporation of America for $925 million in cash, the company reported this morning. The move is part of a plan to win over shareholders and comes after the French drug maker Sanofi-Aventis made an unsolicited offer to acquire the company.
Genzyme Genetics, the business unit under agreement to be sold to Burlington, NC-based LabCorp (NYSE:LH), took in $371 million of Genzyme’s $4.5 billion in 2009 revenue. LabCorp “is committed” to offering jobs to the Genzyme unit’s roughly 1,900 employees and senior managers, according to Genzyme. This sale pact comes on the heals of an internal memo that Genzyme CEO Henri Termeer sent to employees last week to announce that the company would let go about 1,000 of the company’s 12,000 total workers over the next 15 months.
Both the sale of Genzyme Genetics and the job cuts revealed last week are part of Termeer’s plan announced in May to boost shareholder value. The plan also calls for the sale of Genzyme’s diagnostics and pharmaceutical intermediates units. The proceeds from these sales might be used to finance the second half of the $2 billion stock buyback plan that was also announced in May, the company said today.
Genzyme, the world’s largest maker of drugs for rare diseases, has come under intense pressure from shareholders because of manufacturing snafus such as viral contamination found in its Allston Landing plant on June 16, 2009, which caused shortages of its drugs. Activist investors Carl Icahn and Ralph Whitworth criticized management’s handling of the manufacturing problems and caused a leadership shakeup on Genzyme’s board and executive ranks.
Termeer, 64, has built Genzyme to be a diversified business during his 26 years as chief executive. But now the company, founded in 1981, is streamlining its operations to focus on its therapeutics business, which brings higher profit margins than the Genzyme Genetics unit and the other divisions it has on the block.
“LabCorp is the right strategic partner for Genzyme Genetics,” Termeer said in a statement. “LabCorp intends to invest in growing its operations. The business will have the opportunity to continue to grow, serve its customers and fulfill its potential to bring continued innovation to important areas of the diagnostics field.”
Genzyme said the deal is subject to customary closing conditions and is expected to close by the end of the year.