Roche Holding AG (ROG.VX) Monday said it still plans to increase its dividend payout ratio this year, rejecting a press report that suggested the Swiss drugmaker may scrap the payout to finance its planned takeover of the shares it doesn't already own in U.S. biotech company Genentech Inc. (DNA).

Roche, based in Basel, said it plans to raise its dividend payout ratio each year over the next three years, starting from 2008, when the statements were made. "Our dividend policy remains unchanged," spokesman Daniel Piller told Dow Jones Newswires.

The company's shares fell Monday amid concern Roche won't pay any dividends this year - worries fueled by a report in the Financial Times Saturday suggesting the drugmaker plans to raise its bid for Genentech.

At 1400 GMT, Roche was down CHF5.40, or 3.1%, at CHF166.50, underperforming the Swiss market and the broader European healthcare sector, which were down 1.4% and 1.5%, respectively.

The FT report said Roche has financing in place to buy the 44% of Genentech it doesn't already own. The article suggested Roche is thinking about raising its offer to $95 a share from the current $89 which Genentech has rejected as too low. Roche declined to comment on the report.

"Should Roche decide to sweeten its deal, this would be a positive sign for the Roche/Genentech deal in particular and the credit market in general," said Andrew Weiss, analyst in Zurich with Swiss private bank Vontobel in a note to investors. "With the new year just kicked off, credit departments within major banks are going to need to think about where to do business in 2009," he added. Roche's chances of securing financing are intact, given that it is a premium counterparty and that its revenue and earnings are resilient to economic deterioration.

Another plus is the Swiss drugmaker's ability to generate strong free cash flow from products that it has on the market and which benefit from relatively long patents, said Weiss, who has a buy rating on Roche.

Roche's planned takeover, launched in July, has since stalled amid turmoil in financial markets. Frozen credit markets have hampered efforts to raise the $44 billion to $53 billion that Roche needs to complete a deal, said Sachin Jain, analyst at Merrill Lynch, in a note to investors. He has a buy rating on Roche.

The FT report said Roche is about to sign a $10 billion revolving credit facility, and has agreed on a longer-term facility for up to $25 billion with a syndicate of 10 banks. The article suggested that the funds may be raised at 4%, which, if true, would be "highly attractive" terms, Merrill Lynch's Jain said.

Company Web Site: http://www.roche.com

-By Anita Greil, Dow Jones Newswires; +41 43 443 8044 ; anita.greil@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary. You can use this link on the day this article is published and the following day.