UPDATE: Roche Bid For Genentech Turns Hostile, Cuts Offer
January 30 2009 - 4:47AM
Dow Jones News
Swiss drugmaker Roche Holding AG (ROG.VX) Friday turned directly
to shareholders of Genentech Inc. (DNA) attempting to speed up a
deal that aims at gaining full control of the U.S. biotechnology
company, but risking to alienate shareholders and key employees by
lowering its bid.
Roche, based in Basel, cut its bid to $86.50 a share from the
$89 a share it offered when it first launched the deal in July. At
the new price, buying the roughly 44% of South San Francisco, CA,
based Genentech would cost Roche around $42.1 billion, down from
$43.7 billion. Roche expects to start the tender offer in around
two weeks.
Roche made its revised offer conditional on winning more than
half the outstanding Genentech shares and on securing sufficient
funding.
Chairman Franz Humer said he was confident that Roche will
secure funding to consummate the deal despite the reluctance of
banks generally to provide loans amid tight capital markets.
Market participants have grown increasingly skeptical in recent
months over Roche's chances of raising the estimated $30 billion to
$35 billion to complete the deal, given that credit and capital
markets remain choked.
Roche plans to finance the deal by a combination of its own
funds, commercial paper, bonds and traditional bank financing. In a
first move, Roche will be launching a bond, Humer told reporters on
a conference call.
Roche Friday revealed for the first time details of the combined
company's structure, saying it would relocate a number of its
existing U.S. operations to Genentech's site in South San
Francisco. Importantly, Roche plans to keep the Genentech name for
commercial operations in the U.S., to leverage the biotechnology
company's strong brand there.
Roche's revised takeover plan received mixed reviews from market
participants. The company's shares rose on news of a lower offer,
but analysts were skeptical, saying the Swiss group risks losing
key scientists at Genentech and may even have to increase its bid
again.
At 0855 GMT, Roche shares were CHF3.80 higher, or 2.3%, at
CHF164, outperforming the Swiss and the broader pharmaceutical
markets, which were up 0.7% and 2.2% respectively.
"Roche risks paying a price far north of the current offer, if
the Avastin data turns out to be good," said Carri Duncan,
pharmaceutical analyst in Zurich with private bank Sal. Oppenheim,
who has a buy rating on Roche.
Avastin is the key driver of growth and profitability of
Genentech. The study - expected mid-April - examines the cancer
drug's benefits when used right after surgery.
Greenhill & Co. is acting as financial advisor to Roche,
while Davis Polk & Wardwell is acting as legal counsel on the
tender offer.
Company Web Site: http://www.roche.com
-By Anita Greil, Dow Jones Newswires; +41 43 443 8044 ;
anita.greil@dowjones.com
(Julia Mengewein in Zurich contributed to this article)
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