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

Foreign Investment in U.S. Continues With Roche's Genentech Bid

July 22, 2008 11:22 AM
by Anne Szustek
Roche’s proposal to acquire the portion it doesn’t already own of U.S. biotech firm Genentech is but the latest in a long-term cycle of foreign purchases of American holdings.

30-Second Summary

Roche, the Swiss pharmaceutical giant, is proposing to buy the 44 percent it doesn't yet own of of California-based Genentech, offering $89 per share—8.8 percent higher than Genentech’s Friday closing price. It's 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.

Weiss Capital Management’s Mike Burnick told CNBC, “European countries with very strong currencies of their own are picking up classic American corporations. You’re looking at a lot of cheap helpings that look particularly attractive.”

American stalwarts recently the subjects of major foreign investment include Anheuser-Busch, Citigroup, and the Chrysler Building.

The Japanese real estate investments of the early 1990s were rooted in the same circumstances that are bringing about the recent heavy foreign investment, including those by the UAE sovereign wealth funds. And both developments were met with populist alarm over America's crown jewels being acquired by foreigners.

But, as Warren Buffett pointed out in his annual letter to Berkshire Hathaway shareholders this spring, “There’s been much talk recently of sovereign wealth funds and how they are buying large pieces of American businesses … When we force-feed $2 billion daily to the rest of the world, they must invest in something here.” Like economies themselves, foreign investments ebb and flow, he argues.

CNBC also points out that the current economy may dissuade some companies from pursuing M&A, with buyouts limited to cases of clear synergies.

See Reuters coverage

Headline Links: Roche moves to buyout rest of Genentech

Background: Genentech stock timeline, performance of the Swiss franc, sovereign wealth funds

Historical Context: Cyclicity of foreign M&A activity

Related Topics: Other foreign capital influxes to U.S. firms

Opinion & Analysis: Perspectives on foreign investment, biotech buyouts

Reference: U.S. economy guide


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