Defining the Contingent Value Rights in Genzyme (GENZ, SNY)

February 16, 2011 · Filed Under M&A 

By now you already know about the confirmed acquisition by Sanofi-Aventis (NYSE: SNY) for Genzyme Corporation (NASDAQ: GENZ).  The companies have finally entered into a definitive agreement where Sanofi-Aventis will pay $74.00 per Genzyme share in cash along with a contingent value right.

The deal comes to about $20.1 billion before the consideration of the contingent value right.  Genzyme shareholders will receive one Contingent Value Right for each share they own.  These are referred to as CVRs by the investment bankers and each CVR gives each holder the right to receive additional cash payments if specified milestones are reached related to Lemtrada™ or if a milestone related to production volumes in 2011 for Cerezyme® and Fabrazyme® is achieved.

The value to each CVR is as follows:

  • $1.00 per CVR if specified Cerezyme®/Fabrazyme® production levels are met in 2011
  • $1.00 per CVR upon final FDA approval of Lemtrada™ for multiple sclerosis (MS) indication
  • $2.00 per CVR if net sales post launch exceed an aggregate of $400 million within specified periods per territory
  • $3.00 per CVR if global net sales exceed $1.8 billion
  • $4.00 per CVR if global net sales exceed $2.3 billion
  • $3.00 per CVR if global net sales exceed $2.8 billion

We had highlighted that the total workout could come to about $80.00 after the effect of the CVR, but we also gave a list of other buyout targets that could be up for consideration as well.

JON C. OGG

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