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Keystone, Georgios Kefalas/AP
Franz B. Humer, chairman and CEO of
Roche Holding AG.

Genentech Rejects Roche Bid, For Now

August 14, 2008 11:22 AM
by Anne Szustek
A committee of three Genentech board members said Roche’s $89-per-share bid to up its 56 percent stake to full company ownership “substantially undervalues” the biotech firm.

30-Second Summary

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The three-person committee did not refuse Roche’s takeover offer outright however, saying it “would consider a proposal that recognizes the value of the company and reflects the significant benefits that would accrue to Roche as a result of full ownership.”

Roche’s $89 bid was 8.8 percent higher than Genentech’s closing price on July 18, the last trading day before Roche made its offer on July 22. On August 12, Genentech stock closed at $97.85

Several Wall Street observers were predicting an initial rejection by Genentech. Mark Schoenebaum, a biotech analyst at Deutsche Bank, was quoted as saying in Forbes that the company’s reaction “contains no major surprises.” He foresees a Genentech-Roche merger sometime in the next two months.

The New York Times’ DealBook blog writes that Lazard Capital Markets’ Joel Sendek sees Roche’s bid going as high as $100 per share. Sanford C. Bernstein analyst Geoffrey Porges wrote a note to investors that because of the high quality of its research, Genentech's price-per-share could go as high as $130.

“The special committee is confident in the company’s strong financial and clinical momentum and its uniquely productive R&D capabilities, which will continue to enhance shareholder value, " Genentech special committee chair Dr. Charles A. Sanders said in a statement published on the company’s Web site. “In addition, we look forward to the company maintaining its successful relationship with Roche, regardless of ownership structure.”

The New York Times’ DealProfessor wrote earlier this month that any move by Roche to “squeeze out” minority shareholders would be tangled in Delaware investment law, and that Genentech’s special committee will have major say in the deal-making process.

The July offer marked the latest entry in a convoluted corporate timeline for Genentech, which went public in 1980. Roche acquired a majority stake in Genentech in 1990 and the rest in 1999, only to sell a minority stake to the public a short while later.  It is that stake that Roche now seeks to again acquire.

Thanks to the sagging U.S. dollar, even premium purchases are inexpensive to foreign firms such as the Swiss-franc wielding Roche, whose principal currency is less prone to market shocks.

Headline Link: ‘Genentech to Roche: You’re Cheap’

Background: Roche’s July bid; Genentech stock timeline

Reactions: Genentech’s special committee responds

Analysis: ‘Genentech to Roche: No, But Keep Talking’

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