3rd UPDATE: Roche Seals $46.8 Billion Genentech Deal
12 Marzo 2009 - 9:32AM
Dow Jones News
Swiss drugmaker Roche Holding AG (ROG.VX) said Thursday it
sealed a friendly deal with Genentech Inc. (DNA) to buy the 44% of
the U.S. biotech company that it doesn't already own for around
$46.8 billion, after raising the offer price to $95 a share.
Roche, based in Basel, said it expects the transaction to be
accretive to earnings in the first year after closing.
The agreement ends a nearly eight-month battle, in which
Genentech repeatedly rejected Roche's offer. Last Friday, Roche
increased the offer price to $93 a share. The higher offer brought
Genentech's independent board of directors to the table, with
intense merger talks starting Saturday, Roche Chairman Franz Humer
told reporters on a conference call Thursday.
The agreement finally reached is for a slightly higher price of
$95 a share.
"We believe this is a fair offer for Genentech shareholders,"
said Charles Sanders, chairman of a special committee of
independent Genentech board members in a statement. "We look
forward to working with Roche to complete the transaction as
expeditiously as possible."
The deal comes hard on the heels of Merck & Co's (MRK) $32.6
billion agreement to acquire Schering-Plough Corp. (SGP) and
follows Pfizer Inc's (PFE) $68 billion January agreement to take
over Wyeth (WYE).
The spike in drug sector M&A activity occurs when share
prices of many pharmaceutical companies are being seen as
undervalued by many players after the past year's sharp declines,
despite the sector's often lauded defensive character in times of
turmoil.
Still, with their strong cash-flows and balance sheets,
top-rated drug companies find it easy to raise cash to finance
deals. The sector's M&A activity also reflects the fact many
big drugmakers face losing top moneyspinners as best-selling
products lose patent protection.
Roche Thursday said its combination with Genentech should
generate annual pre-tax cost synergies of approximately $750
million to $850 million. Synergies will be driven by reducing
complexity and eliminating duplicative functions and processes in
areas like late stage development, manufacturing, corporate
administration and support functions, Roche said.
Roche Chairman Humer stressed that job cuts aren't in focus.
"The objective is not to walk in and cut jobs, the objective is
to make one of the most effective companies in research," he told
reporters.
Chief executive Severin Schwan had told shareholders that
driving the integration of the two companies will be Roche's main
goal this year, after the merger has been completed.
Roche shares closed Wednesday at CHF145.50, down 10%
year-to-date, and thus outperforming the European sector at large,
which is down 15%.
Company Web site: www.roche.com
-By Anita Greil, of Dow Jones Newswires; +41 43 443 8044;
anita.greil@dowjones.com