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Strategies & Market Trends : Speculating in Takeover Targets -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (2349)	11/10/2010 12:35:35 AM
From: richardred	Read Replies (1) \| Respond to of 7252

More Skeptical of a Genzyme Takeover By BRENDAN CONWAY NEW YORK—The worry that Genzyme Corp. may not be acquired after all appears to be gaining steam among options traders. Would-be acquirer Sanofi-Aventis renewed calls for talks with the Cambridge, Mass., biotechnology company Monday. Genzyme put trading was elevated in contracts that make money only if the stock returns to levels last seen before the French drug giant's $69 per-share hostile offer was first reported in July. A put conveys the right to sell shares at a fixed price. It would be a big surprise for investors if a deal were somehow not consummated. The stock has traded above the bid for months amid analyst predictions that Sanofi would need to sweeten its offer. But the activity in $60 December put options would bring "a handsome profit" for traders if the takeover effort fails, OptionMonster.com analyst Chris McKhann wrote to clients. He said the moves looked like speculative trading rather than hedging—two common uses of put options—since they aimed so far below the stock's current value. Genzyme's shares were at $71.72 in recent trading. Genzyme and Sanofi have been locked in a delicate dance since the summer and have stalled over matters besides valuation. Flashpoints include the value of turnaround efforts related to Genzyme's manufacturing problems as well as the sales potential for a multiple-sclerosis treatment in development. At a price of 55 cents, December $60 put options profit from or guard against drops in Genzyme's stock beneath $59.45 by the middle of next month. Overall, options traders still seem optimistic about the chances of a deal. Roughly four bullish call options are outstanding in the market for every three puts, according to Trade Alert put-call data. That is normally a signal of optimism. A call option conveys the right to buy shares at a fixed price. But many of the bullish positions may hold over from the rush of optimistic summer trading, when investors piled into Genzyme calls. The activity has since been muted. Monday's trading was "a red flag of sorts signaling shares in Genzyme could pull back sharply ahead of expiration," Interactive Brokers wrote in a report to clients. online.wsj.com