Genzyme Comes Back to Win Bioenvision Vote—Disputed Merger to Go Forward
Bioenvision shareholders have voted to approve Genzyme’s takeover offer, paving the way for the controversial merger to move forward, the two companies announced late this afternoon. If it closes as planned, the deal—which passed after months of dispute that saw the shareholder vote extended several times—will win Cambridge-based Genzyme (NASDAQ: GENZ) worldwide rights to the leukemia drug clofarabine.
It was a hard-fought victory for both Genzyme and Bioenvision’s senior management, which had unanimously backed Genzyme’s $5.60-per-share offer for the firm—a price that would quickly become the subject of much angst and debate. “We are very pleased that Bioenvision shareholders voted to support this merger,” said Mark J. Enyedy, president of Genzyme Oncology, in the release. “We are deeply committed to furthering the clinical development of clofarabine and making it available on a global basis so that patients around the world with these very difficult forms of cancer will have access to the therapy.”
The vote could also be seen as something of a vindication for Genzyme, which held fast to its offering price even after Bioenvision shareholders initially—and roundly—rejected the deal in July. At the time Genzyme, via a tender offer, was only able to garner about 22 percent of Bioenvision stock, and almost all of that came from Bioenvision’s senior management and directors. How Genzyme was able over the last few months to come back from that seemingly resounding defeat is unclear, but apparently enough shareholders were either tired of the fight or finally convinced by Genzyme’s arguments that it was paying a fair price for the stock.
Either way, the deal cast a strong spotlight on Genzyme, unfolding as it did like the business version of a soap opera. It first made headlines in early June, when Adam Shay, an individual Bioenvision stockholder, put up a website called rejectgenzymetenderoffer.com to make the case against the Genzyme takeover. The main issue for Shay and many other stockholders was that the $5.60 per share price seemed to dramatically undervalue the potential of Bioenvision and clofarabine, which some analysts expect to achieve sales of up to $1 billion per year. Indeed, several analysts had set a roughly $9 one-year price target for Bioenvision.
Shay was joined in his opposition by SCO Capital, then Bioenvision’s largest minority shareholder, with roughly 13 percent of the stock. After an initial tender offer failed to garner a majority of Bioenvision’s shares, Genzyme extended the offer—only to lose shares during the extension period as some stockholders changed their minds. When the dust settled the company only had about 22 percent of the stock; it needed 50 percent plus one share for its bid to go through.
Suffice it to say things got even wilder from there. Later in July, SCO Capital filed a letter with the SEC claiming it had rights to two Bioenvision board seats. The filing also called for a senior management overhaul and revocation of Genzyme’s existing sub-license to clofarabine in the U.S. and Canada. Genzyme fired back and said it would block any attempts to put SCO representatives on the board. About a week later, Genzyme subpoenaed Shay. The clearly upset North Carolina resident stopped his blogging on the deal, posting a final note on his website lambasting Genzyme. “I never realized the extent to which they are willing to go to quash dissension…” he wrote. “At the end of the day it doesn’t come down to how much money you have. It comes down to right and wrong and how that all sorts out with the man upstairs.”
And that wasn’t all. A number of individual and class-action lawsuits have been filed against both Bioenvision and Genzyme related to the deal. And one of the Bioenvision executives who sold his shares ($1.7 million worth) himself filed suit in New York State court seeking $108 million. According to the Boston Herald, he alleged that Bioenvision breached his employment agreement and had failed to pay him for his role in facilitating the deal.
Still not done. A special meeting for Bioenvision shareholders to vote on the issue was held on October 4. With the vote close—47 percent of shareholders had indicated their support for the merger—Bioenvision management adjourned the meeting for one day. The next day came, and management announced the voting had closed but it needed more time for the inspector of elections to tally the results. An answer was promised by October 10, but, you guessed it…not done yet. The night before the promised results, Bioenvision and Genzyme petitioned the Delaware Court of Chancery for permission to reopen the polls until October 22. It turned out Bioenvision had closed the voting the previous week thinking it had enough support to complete the deal, when in fact it was short by 239,000 votes—and had inadvertently shut out a large shareholder who had wanted to vote in favor of the merger. The court agreed. Today’s October 22. And this time, it looks as though (we’re hesitant to pronounce anything as final in this saga—and attempts to reach SCO Capital officials for their reaction were unsuccessful) the merger has been approved. According to the press release, the final tally saw 56 percent of Bioenvision shares voting in favor of the merger.
And let’s give Genzyme credit. Throughout the trials and tribulations it has held fast to its offer. “We believed $5.60 per share was a full and fair price for the company then, and we believe that to be the case now,” Enyedy wrote to the Bioenvision board late last month. Apparently other people ultimately believed it, too.
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