Roche-Genentech deal goes hostile

Roche takes $42B offer to Genentech\'s shareholders

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BASEL, Switzerland—With two bids to acquire the 44 percent of Genentech Inc. it does not already own, Swiss drugmaker Roche in late January officially launched a hostile offer for the San Francisco-based biotech for $86.50 in cash per share, or about $42 billion. Although Genentech has been firm in its stance that Roche's offer is inadequate, Roche has initiated a six-part global bond to help finance its hostile bid.

The companies have been at an impasse since July 2007, when Roche proposed an $89-per-share takeover. According to Roche's filings with the Securities and Exchange Commission (SEC), Genentech initially refused to place a value on the company until Roche raised its offer. In December, Genentech's board of directors told Roche it would consider selling the remaining stake in the company for $112 per share, or about $52 billion.

Unable to reach a deal, Roche said in January that it would go directly to Genentech's shareholders through a tender offer. Genentech's board members advised shareholders to take no action on the offer.

In its SEC filings, Roche also said it plans to exercise its right to increase its representation on Genentech's board to account for its 100 percent stake in the company, which would give it a majority on the board. The tender offer expires March 12, but Roche has the option to extend it.

Much of the impasse stems from the anticipated clinical trial results of Genentech's blockbuster cancer drug Avastin, which is in trials for post-surgery colon and lung cancer. If the drug is successful in clinical trials, however, it could bring add $1 billion to the total $2.7 billion in sales it saw in the United States last year—increasing Genentech's value to Roche.

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