Options Impact of Sanofi's Slow Motion Takeover of Genzyme

Includes: SNY
by: Derek Lowe

You'll have noticed that we haven't been hearing a lot about Sanofi-Aventis (NYSE:SNY) trying to round up Genzyme (GENZ) shareholders as part of their takeover plan. That's because the two companies seem to have found a way to negotiate with each other, so it doesn't look like we're going to go into full proxy-fight mode. This Bloomberg article gives the impression that a number of issues have been worked out, and that there are just a few figures left to agree on. It's quite possible that Genzyme's executives and board weren't able to find anyone else who agreed with their public assessment of what their takeover price should be, realized that they were probably going to be stuck with this deal, and decided to make the best of it.

So how does that leave that big bet in the options market from last summer? Well, selling October 75 calls worked out just fine; GENZ never made it over that price, so whoever bought the things on the other side of those contracts ended up handing over all their money to the people who wrote them. But using the proceeds to set up a 65-55 put spread for this month, that doesn't look like it's going to work so well. Genzyme's price has hung in the low 70s the whole time, and doesn't look to make the below-65-but-not-below-55 range that those trades need. Oh, well - let that be a lesson to everyone to stay out of the options market unless you're hedging a position somewhere else. I hope that these folks were.