By Sam Cage
ZURICH, Jan 30 (Reuters) - Swiss drugmaker Roche Holding Ag launched a surprise hostile bid for U.S. biotechnology giant Genentech Inc at a price below its original rejected offer, reflecting tougher financing conditions and a drop in Genentech shares.
Roche is now making a public tender offer at $86.50 per share in cash for the 44 percent of Genentech it does not already own, valuing the deal at $42 billion and replacing its initial $44 billion bid.
The move comes just days after the world's biggest drugmaker, Pfizer Inc, agreed to buy Wyeth for $68 billion, backed by a $22.5 billion loan, indicating debt markets for cash-rich pharmaceutical makers are far from dead.
'We are confident that we will have the financing available when the money is needed,' Roche Chairman Franz Humer told reporters.
Genentech did not return numerous calls seeking comment.
Buying Genentech would give Roche control of all revenue for blockbuster cancer drugs Avastin and Herceptin, as well as absorbing an attractive portfolio of other medicines, and reflects the pharmaceutical industry's rush to acquire biotech assets to fill sparse new-product pipelines.
Roche appeared to be turning up the pressure on Genentech, which analysts said could be trying to delay the process until anxiously awaited clinical data on Avastin due in April becomes available. Positive data that could significantly expand Avastin use would likely drive up the company's value.
Roche stock rose 1.9 percent to 163.40 Swiss francs. Genentech shares were down 3.6 percent at $81.07.
Some Genentech shareholders have already indicated plans to reject the Roche offer.
'We are not going to tender our shares,' said Sam Isaly, a portfolio manager for OrbiMed Advisors, which holds about 3 million Genentech shares.
While the Avastin data for use in colon cancer patients following surgery remains a question mark, Isaly said, 'We're willing to take that risk and we think the shares are worth far more than the current share price.'
Analysts and shareholders have said positive Avastin data could easily push Genentech shares well above $90.
Fellow OrbiMed portfolio manager Sven Borho predicted, 'The majority of the minority shareholders are probably similar to us.'
Roche, which currently owns 56 percent of the Genentech outstanding shares and originally bid $89 per share, pitched its new offer at a premium of nearly 3 percent over Genentech's Thursday closing price of $84.09. That is 6 percent above Genentech's price before the initial offer was announced last year, compared with 29 percent for Pfizer's Wyeth deal.
Roche had initially aimed to acquire the remaining shares through a negotiated settlement -- an offer rejected by Genentech -- and decided to appeal directly to shareholders after further talks failed to reach an agreement, Humer said.
'The plan is to use as financing partly our own funds, and then obviously bonds and then commercial paper and traditional bank financing. We will start by going to the bond market first,' he said.
Roche said it will seek a merger with Genentech if at the end of the offer it owns 90 percent or more of the shares. It did not give details of the possible length of its tender.
Andy Smith, a fund manager at Axa Framlington Biotech who holds Genentech shares, was not interested in accepting the new offer and said he would consider buying more Genentech stock as long as it remained below the offer price.
'We are in Genentech for the longer term, for the growth prospects, and Roche is too,' said Smith, whose fund owns 2.4 million pounds ($3.43 million) worth of the stock.
Andreas Theisen, analyst at WestLB, reckoned few Genentech shareholders will jump at the offer.
Geoff Meacham at JP Morgan also was anticipating shareholder rejection, saying the acquisition could ultimately be concluded at more than $100 per share.
But Leerink Swann's Bill Tanner believes Genentech shareholders should sell, calling the stock 'fundamentally overvalued,' especially given the possibility that Avastin data could disappoint.
Roche made a fresh round of calls to banks after news of the Pfizer-Wyeth deal emerged, bankers close to the Genentech deal told Reuters this week.
Business leaders meeting in Davos, meanwhile, said they saw opportunities in the global downturn, though a hard-nosed focus on cost cutting is the order of the day.
After the initial Roche offer in July 2008, Genentech shares rose to a high of $99.05, but later fell back below the offer price as the credit crisis bit, which gave Roche leeway to lower its bid.
Greenhill & Co is financial adviser to Roche and Davis Polk & Wardell is legal counsel for the tender offer, which Roche expects to commence within approximately two weeks.
($1=.7645 Euro)
($1=.6989 Pound)
(Additional reporting by Bill Berkrot, Katie Reid, Sven Egenter and Paul Arnold; Editing by David Cowell and Matthew Lewis) Keywords: ROCHE/ (zurich.newsroom@thomsonreuters.com; + 41 58 306 7457; Reuters Messaging: sam.cage.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
ZURICH, Jan 30 (Reuters) - Swiss drugmaker Roche Holding Ag launched a surprise hostile bid for U.S. biotechnology giant Genentech Inc at a price below its original rejected offer, reflecting tougher financing conditions and a drop in Genentech shares.
Roche is now making a public tender offer at $86.50 per share in cash for the 44 percent of Genentech it does not already own, valuing the deal at $42 billion and replacing its initial $44 billion bid.
The move comes just days after the world's biggest drugmaker, Pfizer Inc, agreed to buy Wyeth for $68 billion, backed by a $22.5 billion loan, indicating debt markets for cash-rich pharmaceutical makers are far from dead.
'We are confident that we will have the financing available when the money is needed,' Roche Chairman Franz Humer told reporters.
Genentech did not return numerous calls seeking comment.
Buying Genentech would give Roche control of all revenue for blockbuster cancer drugs Avastin and Herceptin, as well as absorbing an attractive portfolio of other medicines, and reflects the pharmaceutical industry's rush to acquire biotech assets to fill sparse new-product pipelines.
Roche appeared to be turning up the pressure on Genentech, which analysts said could be trying to delay the process until anxiously awaited clinical data on Avastin due in April becomes available. Positive data that could significantly expand Avastin use would likely drive up the company's value.
Roche stock rose 1.9 percent to 163.40 Swiss francs. Genentech shares were down 3.6 percent at $81.07.
Some Genentech shareholders have already indicated plans to reject the Roche offer.
'We are not going to tender our shares,' said Sam Isaly, a portfolio manager for OrbiMed Advisors, which holds about 3 million Genentech shares.
While the Avastin data for use in colon cancer patients following surgery remains a question mark, Isaly said, 'We're willing to take that risk and we think the shares are worth far more than the current share price.'
Analysts and shareholders have said positive Avastin data could easily push Genentech shares well above $90.
Fellow OrbiMed portfolio manager Sven Borho predicted, 'The majority of the minority shareholders are probably similar to us.'
Roche, which currently owns 56 percent of the Genentech outstanding shares and originally bid $89 per share, pitched its new offer at a premium of nearly 3 percent over Genentech's Thursday closing price of $84.09. That is 6 percent above Genentech's price before the initial offer was announced last year, compared with 29 percent for Pfizer's Wyeth deal.
Roche had initially aimed to acquire the remaining shares through a negotiated settlement -- an offer rejected by Genentech -- and decided to appeal directly to shareholders after further talks failed to reach an agreement, Humer said.
'The plan is to use as financing partly our own funds, and then obviously bonds and then commercial paper and traditional bank financing. We will start by going to the bond market first,' he said.
Roche said it will seek a merger with Genentech if at the end of the offer it owns 90 percent or more of the shares. It did not give details of the possible length of its tender.
Andy Smith, a fund manager at Axa Framlington Biotech who holds Genentech shares, was not interested in accepting the new offer and said he would consider buying more Genentech stock as long as it remained below the offer price.
'We are in Genentech for the longer term, for the growth prospects, and Roche is too,' said Smith, whose fund owns 2.4 million pounds ($3.43 million) worth of the stock.
Andreas Theisen, analyst at WestLB, reckoned few Genentech shareholders will jump at the offer.
Geoff Meacham at JP Morgan also was anticipating shareholder rejection, saying the acquisition could ultimately be concluded at more than $100 per share.
But Leerink Swann's Bill Tanner believes Genentech shareholders should sell, calling the stock 'fundamentally overvalued,' especially given the possibility that Avastin data could disappoint.
Roche made a fresh round of calls to banks after news of the Pfizer-Wyeth deal emerged, bankers close to the Genentech deal told Reuters this week.
Business leaders meeting in Davos, meanwhile, said they saw opportunities in the global downturn, though a hard-nosed focus on cost cutting is the order of the day.
After the initial Roche offer in July 2008, Genentech shares rose to a high of $99.05, but later fell back below the offer price as the credit crisis bit, which gave Roche leeway to lower its bid.
Greenhill & Co is financial adviser to Roche and Davis Polk & Wardell is legal counsel for the tender offer, which Roche expects to commence within approximately two weeks.
($1=.7645 Euro)
($1=.6989 Pound)
(Additional reporting by Bill Berkrot, Katie Reid, Sven Egenter and Paul Arnold; Editing by David Cowell and Matthew Lewis) Keywords: ROCHE/ (zurich.newsroom@thomsonreuters.com; + 41 58 306 7457; Reuters Messaging: sam.cage.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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