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Roche offers $43.7B for rest of Genentech
2008-07-21
GENEVA - Swiss drugmaker Roche on Monday offered $43.7 billion for the remaining shares of its U.S. biotech partner Genentech Inc. in a move to boost its stature in the market for drugs to fight cancer and other diseases. Roche shares dropped 2 percent after the disclosure, which coincided with Roche's announcement of a 2 percent decline in its first half profit. Roche already owns 55.9 percent of South San Francisco, Calif.-based Genentech, whose anti-cancer drug Avastin is widely prescribed. Roche said it was offering $89 per share, or 8.8 percent above the closing price Friday and 19 percent above the price a month ago, for the rest of Genetech. Genentech shares were trading above the offer price, climbing $13.58, or 16.6 percent, to $95.40 in premarket trading. That is a sign some traders expect a higher price. Roche said its earlier investment in Genentech had helped the biotechnology company focus on innovation and long-term projects, "leading to some of the most important breakthroughs in the treatment of cancer and other life-threatening diseases." Roche co-develops and markets Genentech products outside North America. It said the takeover would "accelerate the search for new solutions for unmet medical needs." "The combined entity will be the seventh largest U.S. pharmaceuticals company in terms of market share," Roche said in a statement from its Basel headquarters. "It will generate more than $15 billion in annual revenues." The company did not specify how many of the 10,700 employees of Genentech would be retained. The takeover offer is the largest ever made by a Swiss concern. Global Insight analyst Gaelle Marinoni said 8.8 percent above the closing price Friday was not a big premium but as Roche already owned the majority of shares, the offer was "probably fair." Minority shareholders "might try to get a little more," she said. Roche said its first half net profit declined to 5.7 billion Swiss francs ($5.6 billion) in view of a weaker U.S. dollar and a sharp drop in government purchases of the anti-viral Tamiflu because anti-pandemic stockpiles have been filling up. Net income was down from 5.9 billion francs ($5.8 billion) for the year earlier period. Roche reports profit figures only for the first six months and full year. Sales were 20 billion billion francs ($19.6 billion), down 4 percent from the first half of 2007. "Our long and successful participation in Genentech has provided great benefits to both of our companies and shareholders. It has resulted in one of the biggest success stories in the healthcare industry," said Franz Humer, Roche board chairman. Roche has been a partner with Genentech since 1990. Genentech did not immediately return a message seeking comment. Roche said the takeover would result in improved operational efficiency by reducing complexity, eliminating duplications and increasing scale in the United States. Humer said Roche's investment in Genentech over the years has helped it to focus on innovation and long-term projects, leading to some of the most important breakthroughs in the treatment of cancer and other life-threatening diseases. "Combining the strengths of Roche and Genentech will create significant value and result in benefits for patients, employees and shareholders," he said. Roche said Genentech's South San Francisco site would operate as an independent research and early development center and become headquarters of combined U.S. commercial operations. The statement said it expects the Genentech Board of Directors will establish a committee of independent directors to evaluate Roche's proposal with the assistance of independent outside financial and legal advisers. Genentech board members who are employees of Roche will not participate in the evaluation of the proposal, it said. The statement said Roche plans a cash merger between Genentech and a Roche subsidiary and that all currently outstanding shares and options of Genentech other than shares owned by Roche would be converted into cash. Precise terms will be determined through negotiations with the independent directors, it said, adding that it expects the deal would be subject to the approval of holders of a majority of the Genentech outstanding shares not held by Roche. "Roche expects to complete the transaction as soon as possible following negotiation of a definitive merger agreement," it said. ___ Associated Press writer Eliane Engeler contributed to this report.
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