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Roche extends Illumina offer

by Andrew Bulkeley | Published March 26, 2012 at 9:10 AM

Swiss pharmaceutical giant Roche Holding AG on Monday, March 26, once again extended its $5.7 billion offer for gene-sequencing specialist Illumina Inc. just weeks ahead of a crucial shareholder vote on the hostile bid.

Basel-based Roche said Illumina shareholders now have until April 20 to accept the $44.50 per share offer after it earlier set a deadline of March 23. So far, the offer has only garnered 144,310 Illumina shares, little more than 0.1% of the target's share capital.

Both companies will make their case directly to shareholders during the target's April 18 annual meeting. Roche is asking investors to expand Illumina's board by two seats to 11 and appoint six of its nominees to the panel to gain a majority. The Swiss company is also asking shareholders to remove a poison pill adopted to dilute Illumina's share capital should the offer succeed.

Meanwhile, Illumina wants shareholders to reject the offer and re-elect CEO Jay Flatley and three other members up for re-election. Illumina Monday said it's still uninterested in the approach.

"Illumina's board of directors continues to believe that Roche's offer is grossly inadequate, and that Illumina is positioned to create far more value than Roche has offered. Our stockholders clearly agree," the San Diego, Calif. company said.

Although Roche is adamant that the current bid is its final offer, its history says otherwise - and analysts and investors seem to be unanimously anticipating a sweetened offer. In 2008 the Swiss company bought both Tucson, Ariz., tissue analysis company Ventana Medical Systems Inc. and a 44% stake in San Francisco's Genentech Inc. after month-long hostile offers that ended when Roche increased its bid.

Roche has repeatedly asked Illumina to enter talks on an agreed deal but the target has resisted, accusing Roche of taking advantage of a dip in its share price after it fell from a high of $79.40 in July to a low of $25.57 in December.

Roche shares gained Sfr0.50 in morning Zurich trade to Sfr157.80 ($172.91). Illumina closed Friday well above Roche's offer at $50.46

Illumina's gene-sequencing equipment would help Roche better target tumors and develop personalized cancer treatments when coupled with its own oncology products. This complementary relationship will make it difficult for other suitors to make a white knight approach for Illumina since they wouldn't benefit as much from an agreement.

The battle has raged since Roche unveiled its unwanted cash offer on Jan. 25.

Greenhill & Co. and Citigroup Inc. are providing financial advice to Roche and Davis Polk & Wardwell LLP are serving as legal counsel.

Goldman, Sachs & Co. and Bank of America Merrill Lynch are Illumina's financial advisers. Dewey & LeBoeuf LLP is the company's legal counsel.

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