Swiss pharmaceutial giant Roche has struck a deal with Genentech to acquire all outstanding shares in the US biotech group for $46.8 billion, or $95 a share.
After a fierce battle that started last summer, Roche finally clinched the deal to buy the 44 per cent of the US biotech group it doesn't already own after Genentech's board recommended shareholders accept the increased cash offer.
Roche had raised its hostile bid to $93 per share from $86.50 last week, which had prompted the restarting of talks between the two companies, Roche chairman Franz Humer said.
Roche's share price was down 1.3 per cent at 143.60 Swiss francs by 0906 GMT, when the DJ Stoxx European healthcare sector index was up 0.2 per cent, having gained in recent days on expectations that the company would get the deal done and hence improve its performance with Genentech fully embedded.
Buying Genentech will give Roche control of all revenues for big-selling cancer drugs Avastin and Herceptin, as well as absorbing an attractive portfolio of new medicines.
The buy-out is the third major deal in the pharmaceutical industry this year, after Pfizer agreement to buy Wyeth for $68 billion in January and Merck's $41 billion agreed bid for Schering-Plough Corp this week.
Big drugmakers have been seeking to diversify and reduce their reliance on slow-growing traditional prescription medicines, which face patent expiries and falling prices.
The Genentech deal is expected to be accretive to earnings per share in the first year after closing and to generate annual pre-tax synergies of $750-850 million, Roche said
The combined group would be the seventh largest US pharmaceuticals company by market share, with around $17 billion in annual revenue in the United States.
Roche's initial bid was rejected last year, and the Basel-based company turned hostile after several months, during which the financial crisis raised doubts about financing, and Genentech's shares fell below the offer price.
Roche, however, successfully raised $39 billion in the bond market which, together with cash on hand, gave it the financial firepower to get a deal done.
Financing is not an issue following the bonds and Roche may no longer need a syndicated loan, Mr Humer said.
Mr Humer said he did not believe there was a danger of losing Genentech employees -- a risk some analysts have voiced -- adding the deal would give an enormous amount of security to employees of both companies.
The Swiss group will look at ways of retaining key Genentech staff and will consider a new plan to persuade them to stay. It has no plans for job losses in research and early clinical development and expects to keep the sales forces of both companies, but will look at savings in other areas.
Mr Humer is to meet with Genentech chief executive Arthur Levinson as quickly as possible to discuss whether Genentech management stays on.
"The objective is not here to walk in and cut costs, the objective is to make this one of the best companies in the world in health care," he said. "I have a strong conviction that most if not all senior management will stay on."
Reuters