Genentech is target of hostile bid by Roche
Swiss drug maker Roche Holding surprised Wall Street with plans for a lower-than-expected and hostile $42.1-billion buyout offer for Genentech Inc. on Friday, a move some consider a tactic to force negotiations with the biotechnology behemoth.
The $86.50-a-share offer, $2.50 less than an offer rejected in July, sparked some concern from analysts that key personnel at the biotech pioneer could leave, depending on any potential deal.
Roche said it would formally make the offer directly to shareholders within two weeks. Several analysts have said it is a possible attempt to force talks with what has been a reticent Genentech board and take advantage of falling share prices amid the global economic crisis.
Roche already owns 55.8% of Genentech, and had its prior $89-a-share offer rejected as too low by the South San Francisco-based company’s board last July.
The new offer values the outstanding shares at about $1.6 billion less than the previous bid.
Genentech shares fell $2.85, or 3.4%, to close at $81.24. The stock has traded between $66.80 and $99.14 over the last 52 weeks.
Roche said its new offer is aimed directly at shareholders, bypassing the board. The offer is significantly lower than the $100-a-share value analysts had been touting for several months.
“We feel it is now time to give the Genentech minority shareholders the opportunity to decide on our offer,” Roche Chairman Franz Humer said in a statement.
“Especially in the current market environment the offer provides an opportunity for all public shareholders to achieve liquidity and to receive a fair price for all their shares.”
The lower-than-expected offer comes amid a dismal global economy and after several lackluster quarters for Genentech.
Many on Wall Street had been pinning hopes for a near-$100-a-share offer to upcoming study data on Avastin, expected in April. The drug is approved for colon, lung and breast cancer, and many say it has already saturated the market in those first two uses, leaving little room for growth.
Genentech derided the move by Roche in a statement Friday but said it wouldn’t take a position until the drug maker formally makes the offer.
“The special committee is disappointed that Roche has taken this unilateral and opportunistic step in an attempt to take advantage of current market conditions,” Genentech said.
