Roche of Basel, Switzerland, is following keen industry interest in gene sequencing -- Illumina's forte -- and is hoping its $44.50 per share bid can convince shareholders of the logic of a deal after the target's board rebuffed Roche.

The offer is an 18.1% premium to Tuesday's close and a 64% premium to the stock's Dec. 21 close, the day before market rumors of Roche's interest leaked out. On Wednesday, the announcement pushed Illumina shares up 43%, or $16.31, to $54, showing investors, like analysts, are betting on a higher offer.

"Resistance pays off," wrote Vontobel Research analyst Andrew Weiss. He noted that negotiations accompanying hostile offers usually last between nine and 18 months and result in final bids between 10% and 20% higher that the original offer.

Illumina's technology allows doctors to identify the genetic makeup of tumors and craft targeted treatments. Roche, already the world's biggest maker of cancer-fighting drugs, wants to expand its analytical capabilities to support drug sales. Last summer, it signed a cooperation agreement with Hamburg's Evotec AG to use Evotec's genetic analysis tools for its own oncology medications.

Roche said it first approached Illumina in December and decided to go directly to shareholders after the target's board refused to enter negotiations. Roche said it would also attempt to gain a majority on Illumina's board during the target's 2012 general meeting.

"It is our strong preference to enter into a negotiated transaction with Illumina, and we remain willing to engage in a constructive dialogue with Illumina to jointly develop an optimal strategy for maximizing the value of our combined business," Roche CEO Severin Schwan said in statement.

Schwan later told journalists he wouldn't improve the offer. "It certainly represents full and fair value for Illumina shareholders," he said on a conference call.

Roche will finance the acquisition with existing cash and credit lines but said it would move its applied-sciences activities to Illumina's San Diego headquarters.

"It's a major strategic step and puts the company at the top of genomic sequencing," Kepler Capital Markets analyst Martin Vögtli wrote in a note. He has a buy rating on the stock and said the price was "hefty."

Roche investors seemed to agree with the analyst, pushing the stock down 2.8%, or Sfr4.60, to Sfr160 ($173.50).

In the third quarter, Illumina posted sales of $235.5 million, a slight decrease over the third quarter of 2010, with net income slipping by a third to $20.2 million because of research expenditure. The company, which employs more than 2,100, began restructuring in the fourth quarter to adjust to forecast cuts in government spending.

Although 2011 saw plenty of blockbuster deals, the offer is the biggest since Teva Pharmaceutical Industries Ltd. closed its white-knight, $6.8 billion takeover of West Chester, Pa.-based Cephalon Inc. in October. Israel's Teva edged out an offer from Mississauga, Ontario-based pharma giant Valeant Pharmaceuticals International Inc.

Roche has successfully used hostile approaches in the past to reel in rivals. In 2008 it won over shareholders of Tucson, Ariz., tissue analysis company Ventana Medical Systems Inc. by sweetening an unwanted $3 billion bid to $3.4 billion.

That same year it convinced minority shareholders of San Francisco's Genentech Inc. to hand over the 44% stake it didn't already own after eight months of haggling -- it also increased its approach to $46.8 billion from an initial $43.7 billion.

Illumina's board on Wednesday acknowledged the approach but offered little comment. "Consistent with its fiduciary duties and responsibilities, and in consultation with its financial and legal advisers, Illumina's board of directors will thoroughly review Roche's proposal and make a recommendation to stockholders in due course," the company said.

Greenhill & Co. and Citigroup Inc. are providing financial advice to Roche, while a Davis Polk & Wardwell LLP team led by Arthur F. Golden and Marc O. Williams and including Brian Wolfe, Christina Henderson and Sabrina L. Ursaner is 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 with a team led by partners Rick Climan, Keith Flaum and of counsel Frederick Kanner.