Illumina announces stockholder rights agreement in wake of Roche proposal

SAN DIEGO—In a continuation of Illumina's apparent aversionto Roche's acquisition proposal, the company has announced that its Board ofDirectors has adopted a Rights Agreement, pursuant to which one preferred stockpurchase right will be distributed as a dividend on each share of Illumina'scommon stock held on record as of the end of business on Feb. 6, 2012. Therights, which are not exercisable, will initially be represented by Illumina'scommon stock certificates or by the registration of uncertificated share ofcommon stock in the share register.

Rights agreements are an effort by companies to defendagainst a company takeover, and Illumina's announcement comes a day after thecompany confirmed in a press release that it had received a proposal from Rocheof $44.50 per share in cash, approximately $5.7 billion. Under the agreement,with certain exceptions, if any individual or group becomes the owner of 15percent or more of Illumina's stock, then each right owned by otherstockholders will entitle them to purchase, "at the Rights' then-currentexercise price," share of Illumina's stock having a market value of twice thethen-current exercise price. If, after an individual or group does become anowner of 15 percent or more of the common stock, the company becomes involvedin a merger or other business combination, the rights will entitle each holderto purchase (at the right's then-current exercise price) common shares of the acquiringcompany that have a value of twice the aforementioned price.

"Consistent with its fiduciary duties, the Illumina Boardhas taken this action to ensure that our stockholders receive fair treatmentand protection in connection with any proposal or offer to acquire the Company,including the proposal announced by Roche, and to provide stockholders withadequate time to properly assess any such proposal or offer without unduepressure while also safeguarding their opportunity to realize the long-term valueof their investment in the Company," Jay Flatley, Chief Executive Officer ofIllumina, said in a press release.

It is doubtful, however, that the delaying tactic will domuch to dissuade Roche from the acquisition. Roche seems to view Illumina as anextremely attractive option, noting in a pdf report of their announcement toinvestors regarding the offer that Illumina is a "solid business with strongrevenue and margins," and that the acquisition will increase marketparticipation, strengthen portfolio, unlock commercial potential and provideentry into in-vitro diagnostics forRoche. In a letter to Flatley regarding the proposal, Dr. Franz Humer, Chairmanof Roche Holding Ltd., said that Roche "continues to prefer a negotiatedtransaction with Illumina," but also noted that "we believe time is of theessence and are prepared to move forward expeditiously by committing allnecessary resources to complete a transaction promptly." It should be notedalso that Roche has made no mention of raising their offer even in the face ofIllumina's continued disinterest, an offer that Humer noted was "compelling"and of "substantial value."

Illumina's announcement follows continued reluctance toenter into discussions from Illumina as well as a recommendation to itsshareholders not to take any action with regards to the offer until the boardhas fully examined it.