Genzyme and Relational Investors

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Genzyme and Relational Investors Case
Section 1- Introduction to Genzyme and Relational Investors Case Genzyme Corporation, founded in 1981, is one of the largest biotechnology companies in the United States. Under the guidance of its long-term CEO, Henri Termeer, Genzyme has been able to grow substantially since its inception in 1981. More importantly to Termeer, because of its breakthroughs in creating medicine for rare diseases, Genzyme has also been able to change the lives of numerous individuals suffering from these diseases by developing a cure for some of them. Relational Investors, one of Genzyme’s primary stockholders, believes that even though Genzyme had a very good growth rate when compared to the rest of the biotechnology industry, Genzyme stock was still significantly undervalued. To fix this, Ralph Whitworth, the CEO of Relational Investors, offered some recommendations as to how Genzyme could fix this problem. These recommendations were: improve capital allocation decision making, either implement a share-buyback program or issue a dividend, add more board members to the Genzyme board of directors who had more financial expertise, and change board member compensation to reflect the performance of Genzyme. Termeer was very familiar with how ‘activist investors’ such as Ralph Whitworth operated. Having already fought of Carl Icahn, who sought major changes in the way Genzyme operated, Termeer knew how important his negotiations would be with Ralph Whitworth. These negotiations were a pivotal point in the history of Genzyme Corporation. If Termeer was able to fight of Whitworth as he had fought of Icahn, Genzyme would continue to operate as it normally had, but if Whitworth came out victorious in these negotiations, then major changes could potentially occur.

Section 2- Problem Definition How will Henri Termeer handle the threat of an activist…...

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