Remember those old Pepe Le Pew cartoons, where the aggressive advances of the french skunk were unwanted by the cringing black cat? Sanofi is that french skunk!
I was thinking, with a huge downturn in the market imminent, a Sanofi bid for Genzyme is premature, the same as it would be premature for anyone to buy a house in the US right now. A couple economic charts gave me some perspective:
GENZ vs S&P 500
Here you can see a high correlation during the mid 2000s bounce back. But Genzyme didn’t careen to earth like the S&P did in 2008-09. Sanofi Aventis may think GENZ will defy gravity again, and put a bid in. If we return to the lows on the S&P, then GENZ might be good insurance.
Sanofi-Aventis vs USD index
Here you can see SNY (ADR) has had a roughly inverse correlation to the US dollar. As the markets retrench further on the way to the March 2009 lows, there will be a flight to US dollars, and ostensibly SNY will go down and not have the strength to put a bid in.
So a few visuals tell us why Sanofi targeted Genzyme, and the timing for their bid.