2nd UPDATE: Roche Still Plans To Raise Dividend This Year
January 12 2009 - 9:36AM
Dow Jones News
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
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