Sanofi-Aventis chief executive Chris Viehbacher should aim to land U.S. biotech group Genzyme for around
$19 billion to keep his investors on side, according to institutional shareholders in the French firm.

Two shareholders told Reuters on Tuesday they would not be happy with Sanofi paying much over $70 a share, or around $18.7 billion, while a third said he was concerned about valuations being put on Genzyme.

Viehbacher, who took over 20 months ago, is shaking up the Paris-based firm by cutting costs and diversifying operations. Buying Genzyme would be the biggest move yet in the hunt for new sales to offset revenues lost as a result of patent expirations.

Sanofi has made a takeover proposal valued at $69 per share to Genzyme and the two sides are discussing the offer, sources familiar with the situation said on Monday.

Genzyme's share price, however, is already above this level - it ended at $70.36 on Nasdaq on Monday and the stock added 1.4% in morning trade in Germany.

Benefit Of The Doubt
One top-15 shareholder in Sanofi acknowledged Viehbacher would probably have to raise his opening offer, but only "a little bit."

"I would give him the benefit of the doubt that he will be reasonable, disciplined with the price," the shareholder said. "Common sense dictates that Genzyme would fit Sanofi. It would make sense for Sanofi to buy them but whether they can agree on a price is a totally different story."

One source familiar with the situation said on Monday that Genzyme was unlikely to accept a deal at under $80 a share. But a second top-30 Sanofi shareholder said Viehbacher would struggle to sell the deal to investors if the price went much above $70.

"If I look at Genzyme, they could make this value-neutral and look attractive at this level, around $70 a share. If you go much higher, that would make it a very tough call. We would need to see a lot of cost cutting and incremental synergies to work," he said. "Any price much higher than this? I do not think the shareholders would like that."

Many analysts think a deal will end up being done in the mid-$70s per share, assuming no counter-bidder emerges. Citigroup analysts said in a research report that Sanofi was likely to be the only buyer and end up paying $74 to $77.

GlaxoSmithKline, Johnson & Johnson and Pfizer have all been mentioned as potential interlopers but industry experts think a "white knight" may be elusive.

Key activist shareholders Relational Investors and Carl Icahn hold 3.8% and 4.9% of Genzyme, respectively.