Roche bid for Genentech turns ‘hostile’ – but stays friendly
pharmafile | February 10, 2009 | News story | Sales and Marketing |Â Â MA, RocheÂ
Roche has launched a renewed bid to buy out Genentech, making a 'hostile' bid for the company by appealing directly to its shareholders rather than its board.
Genentech's management rejected Roche's offer of $89 per share in August, claiming it was an unwelcome and 'opportunistic' takeover bid.
Roche has now launched a new bid, at a slightly lower price per share which values the outstanding shares in Genentech at $42.1 billion.
The companies have become the industry's most dynamic duo, launching a series of blockbuster drugs including MabThera/Rituxan, Herceptin and Avastin. Until last summer Roche had been happy to hold a 55% share in the Californian biotech, but new chief executive Severin Schwan decided the time was right to incorporate Genentech fully into the Roche corporation.
In fact Genentech will be allowed to retain some independence from Roche's Basel headquarters, as well as the Swiss pharma company's New Jersey R&D centre, which will be merged into Genentech's San Francisco operations, and not the reverse.
Even the Genentech name will remain, demonstrating Roche's desire to win the company over at the second time of asking.
Launching the second bid, Roche chairman Franz Humer offered Genentech an olive branch, accentuating the autonomy the biotech firm would retain, and saying they would do whatever it takes to nurture "Genentech's innovative and unique science-driven culture".
One of the main reasons for Roche's move is that in 2015 it will lose the automatic rights it currently enjoys to market new Genentech drugs outside the US.
Another factor is the potential for cost savings by eliminating some of the duplication across the companies. But some of these cost savings may have to be sacrificed – Genentech's board has moved to guarantee that job cuts would be kept to a minimum.
In a widely quoted note to investors, Geoffrey Porges, the biotechnology analyst at Sanford C. Bernstein said Roche had to be careful not to destroy Genentech's most precious asset, its world-leading scientists and "one of the great research entities in the industry's history".
If Genentech rejects the second bid, Roche believes it can call on a long-standing agreement whereby a third party will be called in to value Genentech, with shareholders then obliged to sell at this price. Genentech, however, says this agreement is not valid, which would signal a definite shift in the relationship from the friendly to the hostile.
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