To snag Bioverativ in an $11.6 billion buyout, Sanofi first played it cool—and then bypassed management to make a play with top investor Alex Denner. The result? $85 million for Bioverativ chief John Cox, $122 million for Denner and a projected 5% hike to Sanofi's 2018 earnings, even if the deal's long-term payoff remains a question.
In fact, to read the behind-the-curtain action before Sanofi unveiled the $105-per-share deal, the French drugmaker may have learned a thing or two from its high-profile dealmaking failures in 2016.
No. 1: Sanofi insisted on a friendly deal from the outset. No repeat of its quick move to hostile bidding in the contest for Medivation, which Pfizer ended up nabbing with a $14 billion agreed bid.
No. 2: Sanofi stuck to the script. No backtracking on price, no “extensive due diligence requests” at inopportune moments, as Actelion disclosed in its prospectus after rejecting Sanofi in favor of a deal with Johnson & Johnson.
But the tactic that may have made the biggest difference was this: After Bioverativ’s management and board turned Sanofi back twice, once in May of last year and once in September, Sanofi’s investment bank dialed up Denner, Bioverativ board member, ex-Icahn partner and current head of the investment firm Sarissa Capital, which owns 1.71 million shares in the company.
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That was late October. Denner asked for a firm offer high enough to be preemptive; Sanofi complied Nov. 3 with a bid of $98.50 per share.
Another thing that could have bent Bioverativ toward a sale? Roche’s positive data for Hemlibra, a hemophilia drug set to compete directly with Bioverativ products—and the drug that, when the deal was announced, was cited by analysts as a threat to the buyout’s long-term payoff. When management touted their long-range plan as a standalone company to the Bioverativ board, Hemlibra came up in questions, the prospectus notes—specifically, “its potential impact on the competitive marketplace.”
Needless to say, Bioverativ turned down that $98.50 offer, but the company was Sanofi heard Bioverativ’s case in a meeting with management Dec. 18 in New York, at the offices of Bioverativ’s law firm. Sanofi came back with follow-up questions. Worried that news of the putative deal would leak to the press—particularly with the J.P. Morgan Healthcare Conference coming up—Bioverativ inked a confidentiality agreement with Sanofi.
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A couple of phone calls—including one directly to Denner again—and a special board meeting later, Sanofi had persuaded Bioverativ to sit down again Jan. 3. Chairman Serge Weinberg tried to stand firm on his bid, saying he’d “find it very difficult to go back to the board of directors of Sanofi and request a higher price,” but by Jan. 4, Bioverativ had its $105-per-share bid. By Jan. 22, the two were announcing their deal.
Now, Bioverativ is preparing to shell out to its management and board, with CEO John Cox reaping up to $85 million. That includes a combination of the shares he owns outright ($7.1 million); vested options ($6.4 million); and options and restricted shares that will be vested as the deal closes, which add up to more than $68 million.
Plus, he’ll collect $3.27 million in cash if he’s asked to leave within two years afterward. All in all not too bad for running the independent company for a little more than a year.
As for Denner, he and his firm will together reap $122 million from selling their shares, and he’ll personally collect more than $2 million for his options.
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And Sanofi? During its fourth-quarter earnings report, the drugmaker said Bioverativ will add to its earnings beginning this year, at a time when its diabetes franchise is shrinking and the company needs all the help it can get. It’s counting on slow uptake for Hemlibra, which may or may not bear out. And as Bernstein analyst Tim Anderson pointed out in his post-earnings note “investor concerns about the sustainability of Bioverativ's business will likely continue.”
But ODDO BHF analyst Sebastien Malafosse wrote Thursday that his firm expects Bioverativ to add 5% to earnings per sahre this year. And he’s positive on the payoff despite the Hemlibra risks. “The Bioverativ deal should help to change perceptions on Sanofi,” the note states, “and is already consistent with a return to growth.”