Genzyme Takeover Bid for Bioenvision Still Alive as Special Session Adjourns For the Day

With the vote on Genzyme’s takeover bid seemingly far closer than expected, shareholders of New York-based Bioenvision adjourned a special meeting today, the company announced this afternoon. The session will resume tomorrow with the outcome apparently too close to call.

At issue is Cambridge-based Genzyme’s (NASDAQ: GENZ) $5.60-per-share offering price for Bioenvision (NASDAQ: BIVN). That price was, in effect, rejected earlier this summer when shareholders only tendered about 22 percent of outstanding shares under Genzyme’s initial tender offer, and almost all of the shares tendered at that point were from the Bioenvision board members. At today’s session, though, according to the announcement, holders of about 47 percent of “the company’s issued and outstanding shares of common stock and preferred stock” had indicated their support of the merger. A simply majority vote is needed for the merger to go through.

Throughout the process, New York investment firm SCO Capital Partners, which holds about 13 percent of Bioenvision stock, has led the fight against the bid, most recently reiterating its stance on Monday. SCO said it believes Genzyme’s offer far undervalues Bioenvision and has pressed for a shakeup of the firm’s management. In July, SCO filed a letter with the SEC announcing its intention to remove two Bioenvision board members and replace them with SCO representatives. SCO also is also seeking to terminate Genzyme’s current rights to Bioenvision’s leukemia drug clofarabine.

The Associated Press reported today that Institutional Shareholder Services, a proxy advisory company owned by Riskmetrics Group, had also advised investors to reject the bid. ISS identified an offer in the $8 to $12 range as a more suitable bid for Bioenvision, according to the AP account.

Steven Rouhandeh, chairman of SCO Financial Group, was not happy with the way things went, but he was hopeful the merger would not go through. Rouhandeh said he attended the meeting and that Bioenvision’s CEO, Christopher Wood, stood up and made an announcement of the vote so far, and then adjourned the meeting. “I felt like a reporter. I tried to shout out a question. They said they weren’t taking any questions,” Rouhandeh told me this afternoon. “When will management heed the will of shareholders and call it a day?” Rouhandeh said. “You’ve gotten three no votes. How many times do we have to vote?”

Rouhandeh would not offer a prediction for the final outcome. “It shouldn’t go through and it hasn’t gone through, and we continue to hope it won’t go through because we don’t think it is in the best long-term interest of shareholders.”

Genzyme, for its part, has held fast to its offer throughout the process, which began in May. In a letter to the Bioenvision board last week, Genzyme President Mark J. Enyedy wrote that the company wanted to end any speculation that his company would raise 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. He said the company was prepared to proceed as “an active and constructive” minority shareholder.

Bioenvision stock closed trading today at $5.43, up 18 cents. Genzyme closed up $0.07 at $67.85.

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