The personal cost of Genzyme’s “No”…

October 11, 2010

A lot of companies are jumping into M&A deals willingly, but that’s certainly not the case for Genzyme Corporation (GENZ), which is doing its best to fend off Sanofi-Aventis SA’s (SNY) $18.5 billion hostile takeover proposal – despite the buckets of cash that Genzyme’s executives would get in the process.

On October 7, Genzyme issued a press release to announce that its board unanimously agreed to reject the $69 per share offer, and it recommended that Genzyme’s shareholders hang onto their shares and not make a deal with Sanofi. With that stake in the ground, the Wall Street Journal reported (in this October 8 article) that Genzyme is considering a number of options, including seeking aid from a “white knight.”

On the same day that it publicly rejected Sanofi’s offer, Genzyme filed this Schedule 14D-9, and it reveals some interesting details indeed.

Perhaps the most fascinating section comes from the Table that discloses how much the top executives and directors of Genzyme would get if the proposed merger went through. It shows that Genzyme’s Chairman/President/CEO, Henri Termeer, would get almost $120.2 million in cash. (That’s composed of more than $48.9 million for his stock, upwards of $5.56 million for his RSUs, and more than $65.7 million for his stock options.)

But wait, there’s more! Considering that Termeer would get more than $18 million if he were terminated following a change in control (“CIC”), he might actually have to figure out how to manage nearly $138.3 million in cash. And although the numbers for the other players aren’t nearly as staggering as Termeer’s are, they’re impressive nonetheless, and available on pages 10 and 11 of the filing. Of course, all the figures in the schedule are based on the assumption that a merger occurred September 30, 2010, which it obviously did not.

Merger-related filings typically advise shareholders that the interests of the company’s officers and directors may be different than theirs, and certainly no individual shareholder stands to gain as much from a merger as Henri Termeer. Frankly, we bet that a lot of executives in his position would have taken the money and run by finding a way to rationalize that the deal was in the best interest of shareholders and the company.

There’s plenty more in the filing, of course, including some nice detail on the background of the deal (pp. 17-29) that investors may want to read. Meanwhile, we’ll be watching to see what Termeer and company – and their investors – actually end up with.

Image source: smlp.co.uk

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