Roche cut the price of its bid for outstanding shares in Genentech, going hostile and dashing investor hopes of a sweetened offer for the 44 per cent of the US biotech group its does not already own.
Roche Holding AG's new and lower offer, pitched directly to shareholders, was a surprise and reflected tougher financing conditions and a drop in Genentech Inc shares, analysts said this morning.
"We are confident that we will have the financing available when the money is needed," Roche Chairman Franz Humer told reporters.
Roche Ireland employs over 200 people in its pharmaceutical ingredients plant in Clarecastle Co Clare.
Roche is now making a public tender offer at $86.50 per share in cash, valuing the deal at $42 billion, replacing its initial bid that totalled $44 billion.
Roche stock rose 1.8 per cent to 163.20 Swiss francs by 9.24am as investors welcomed the slightly lower price. Genentech shares in Frankfurt rose 1.45 per cent to €65.23 ($85.32).
Roche had initially aimed to acquire the remaining shares through a negotiated settlement - an offer rejected by Genentech - and decided to appeal directly to shareholders after further talks failed to reach an agreement, Mr Humer said.
"The plan is to use as financing partly our own funds, and then obviously bonds and then commercial paper and traditional bank financing. We will start by going to the bond market first," he said.
Buying Genentech would give Roche control of all revenues for big-selling cancer drugs Avastin and Herceptin, as well as absorbing an attractive portfolio of new medicines, and reflects Big Pharma's rush to acquire biotech assets to fill sparse new product pipelines.
But Andreas Theisen, analyst at WestLB, reckons few Genentech shareholders will jump at the offer. "We believe Roche aimed to stick to its take-out plans, but is also trying to get some extra time until maybe financing conditions improve," Mr Thiesen said.
Roche's new offer is at a premium of nearly 3 per cent over the Genentech's closing price of $84.09 yesterday.
Roche had originally bid $89 per share, aiming to grab a greater share of Genentech's promising future earnings profile, based on blockbuster cancer drugs Avastin and Herceptin.
Initially, shares in Genentech rose to a high of $99.05, but later fell back below the offer price as the credit crisis bit, which gave Roche leeway to lower its offer.
And this week Pfizer's $68 billion bid for Wyeth, which was backed by a new $22.5 billion loan in addition to cash and stock, upped the stakes further, indicating pharmaceutical sector M&A was far from dead.
Reuters