Roche Expected To Extend Hostile Illumina Bid On Unchanged Terms

Date : 03/23/2012 @ 6:59AM
Source : Dow Jones News
Stock : Illumina, Inc. (ILMN)
Quote : 242.05  0.63 (0.26%) @ 4:12PM

Roche Expected To Extend Hostile Illumina Bid On Unchanged Terms

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Roche Holding AG (ROG.VX) is expected Friday to extend for the second time its unsolicited offer to buy U.S. gene-sequencing company Illumina Inc.(ILMN) without increasing its bid, as the Swiss drug maker carries on with its waiting strategy.

Roche, which is bidding $44.50 a share for the San Diego-based company, last month already extended its $5.7 billion cash bid offer until Friday, 1800 EDT.

Analysts believe the Basel-based pharmaceutical giant will stick to its waiting approach, and reiterate that the offer on the table is "full and fair," even as it has met fierce resistance from Illumina's board, which dismissed it as too low.

Roche wasn't immediately available to comment.

Earlier this week, Roche appealed directly to Illumina's shareholders, urging them to tender their shares and vote for Roche's director nominees at Illumina's upcoming annual meeting on April 18.

"Roche is expected to raise the bid by about 20% eventually, but for now, they will maintain the pressure and try to talk to Illumina's majority investors to bring them on their side," said David Kaegi, analyst at private bank Sarasin in Zurich.

"This will take some more time, and the whole process will likely drag on over the summer," he added. Kaegi said that Roche will probably not be successful with their director nominees and that Illumina's shareholders will proceed to elect the candidates proposed by the board at their upcoming AGM in April.

The company has written to its own shareholders urging them to reject Roche's "unsolicited and opportunistic efforts to acquire Illumina on grossly inadequate terms."

Illumina's icy stance might be understandable given that the company's stock as recently as last summer traded in the region of $70 a share. However, Roche's offer of $44.50 per share still represents a premium of more than 60% over Illumina's stock price mid-December before rumors of the potential transaction first surfaced. Illumina closed at $25.96 on December 13, 2011.

"Illumina is expensive. If Roche walks away, the stock would come down again," said Birgit Kulhoff, a fund manager with private bank Rahn & Bodmer in Zurich. Kulhoff said Roche would only be prepared to offer a "small increase" over the existing price, before calling off the deal. "There are alternatives, not necessarily better ones, but still alternatives," she said.

Roche, which launched the bid last January, wants to buy Illumina to underpin its personalized medicines startegy.

The world's largest maker of cancer drugs has a history of success with hostile acquisitions and faces little risk that rival bidders will jump into the fray to acquire Illumina. Earlier buys, such as that of diagnostic test-maker Ventana or U.S. biotech group Genentech, indicate that Roche is content to bide its time with deals.

At 0935 GMT, Roche shares were down 0.5% at CHF157.80. Illumina shares closed at $50.22 Thursday.

-By Marta Falconi, Dow Jones Newswires; +41 43 443 8043;

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