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Roche wants talks after Illumina nixes bid

by Andrew Bulkeley  |  Published February 8, 2012 at 11:33 AM
roche227x128.jpgPharma giant Roche Holding AG on Wednesday, Feb. 8, called on Illumina Inc. to enter talks after its target's board rejected the Swiss company's $5.7 billion unsolicited bid.

Roche professed itself "disappointed" by Illumina's rejection.

"As we have previously stated, it remains our preference to enter into a negotiated transaction with Illumina, and we stand ready to commence discussions at any time," Roche CEO Severin Schwan said in a statement.

Illumina's board on Tuesday unanimously asked shareholders not to accept Roche's unwanted offer and said the Basel-based suitor was trying to take advantage of a recent decline in its share price to get the company on the cheap.

Illumina said it not only had great prospects but also that its emerging product offering of personalized cancer treatment also promised exceptional expansion.

"As the growth of this industry accelerates, Illumina is singularly positioned to expand its market leadership, and to deliver value to our stockholders that is far superior to Roche's offer," Illumina president and CEO Jay Flatley said in a statement.

The San Diego-based target labeled Roche's approach "blatantly opportunistic" after its shares slipped from a 52-week high of $79.40 in July to $25.57 in December. Roche is offering $44.50 per Illumina share, but investors have been betting on an improved offer from the outset.

Illumina shares closed 17 cents lower Tuesday at $51.80.

With the exception of noting it would meet its legal duties to shareholders to review all offers, Illumina made no mention of entering talks with Roche, which first approached Illumina in December.

Roche isn't just asking shareholders to sell it their shares. It has also proposed four appointees for election to the company's board at the next general meeting and will also ask investors to expand the board to 11 members from nine. Should the proposal pass, Roche would then also propose two additional executives, gaining effective control of the company.

Roche wants to add Illumina's gene-sequencing equipment to its own analysis activities and offer treatments targeted to the specific DNA of tumors.

The rejection is just one part of Illumina's defense. It also passed a poison pill to make any acquisition more difficult. Those holding shares on Monday, Feb. 6, will be given one preferred stock purchase right as a dividend for each common share, though the right will only be valid if a third-party investor buys 15% of the company.

Investors betting on an improved offer have history on their side. In 2008 Roche bought Tucson, Ariz., tissue analysis company Ventana Medical Systems Inc. and a 44% stake in San Francisco's Genentech Inc. after improving the terms of hostile offers.
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Tags: Illumina Inc. | Jay Flatley | Roche Holding AG | Severin Schwan

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