Two proxy advisory firms have recommended Illumina Inc. (ILMN) shareholders vote against Swiss drug maker Roche Holding AG's (ROG.VX, RHHBY) nominees to Illumina's board, calling its takeover offer inadequate.
The proxy advisor reports comes as Illumina, a U.S. gene-sequencing company, fights to hold off a hostile bid from Roche.
The report from Institutional Shareholder Services said shareholders should vote the Illumina board back into service, and reject Roche's slate because the offer likely undervalues the future of Illumina. Egan-Jones Ratings Co. made a similar call.
ISS said the current bid doesn't offer "meaningful compensation for the potentially enormous long-term opportunity shareholders would forego by selling at this point." It also noted the lack of competition in the near future and the vast potential for sequencing.
Roche expressed disappointment Friday in the report from ISS.
"We respectfully challenge ISS' assertion that our current 'bid does not provide a compelling starting point for negotiations,'" Roche Chief Executive Severin Schwan said. "Our goal has always been to enter into a negotiated transaction with Illumina and we firmly believe that our present offer is more than adequate to serve as a basis for negotiation with Illumina."
Schwan said that while the company is disappointed in ISS's recommendation against Roche's director nominees, the company is "pleased" that ISS notes Roche would be "an excellent partner for Illumina as the sequencing industry grows more intertwined with new drug development."
Wednesday, Roche stepped up pressure on Illumina shareholders, telling them in a letter to tender their shares to Roche's increased offer and vote for its independent director nominees at the company's annual meeting later this month.
Roche, which launched its hostile offer for Illumina in January, last week raised its offer for Illumina to $51 a share from $44.50. However, Roche's sweetened offer, which values Illumina at more than $6.5 billion, has been rejected by Illumina's board as still being too low.
Illumina's stock closed at $52.33 Thursday. The stock is up 72% so far this year.
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; firstname.lastname@example.org