Roche Turns Hostile; Cuts Genentech's Offer to $42 Billion

by Lynn Shapiro, Writer | January 30, 2009
Roche has turned hostile on Genentech, slashing the price of its bid to $86.50 a share, for the 44 percent of the company it doesn't already own.

The lowered offer has irked Genentech shareholders, who had hoped for a sweetened bid after rejecting Roche's August offer of $89 a share as too low. The board put out a statement asking holders to reject it.

At the new price, Roche's buyout is valued at $42 billion, down from the original $44 billion offer. Roche claims that considering the credit crunch, the new offer is fair.

While Roche has owned 55.8 percent of Genentech since 1990, when the South San Francisco-based company, then a start-up, needed Roche to finance its early drug trials, Genentech has since become Roche's crown jewel.

Now, Roche has a dearth of drugs in its pipeline, while Genentech is a powerhouse, with cancer drugs like Avastin and Herceptin on the market and four new drugs expected to win FDA approval this year.

Roche now says it will bypass Genentech's board and take its offer directly to shareholders within two weeks. Roche needs to raise about $30 billion to complete the acquisition--a large sum considering the banks are loath to lend money these days. It remains to be seen whether DNA, Genentech's ticker symbol on the New York Stock Exchange, will take the bait.

On Friday, DNA shares were down 4 percent, to $80.76 following news of the reduced offer, indicating that holders may not jump at the deal.

Meanwhile, Roche shares, which have lost 15 percent over the past year, climbed 1.2 percent to 162.30 Swiss francs.

Upping the ante, Pfizer's $68 billion bid for Wyeth, which was backed by a new $22.5 billion loan in addition to cash and stock, has put the drug sector in play.

Read the announcement from Roche in DOTmed's Press Room: