Reportedly Roche bids to buy Genentech. Roche made an offer to acquire all outstanding shares of Genentech, but do the shareholders get enough? Is the offer fair and adequate?
Many shareholders have contacted us already and expressed their concerns about the offer.
What do you think?
If you hold Genentech, Inc (NYSE:DNA) stock, please contact the Shareholders Foundation, Inc immediately!
EMail:
Mail@ShareholdersFoundation.com
or Call us TODAY!
Phone: +1-(858)-779-1554
UK: 0044 (020)-3006-2734
or send us your information by mail /facsimile
Shareholders Foundation, Inc.
3111 Camino del Rio North
– Suite 423 –
San Diego, CA 92108
Fax: +1-(858)-605-5739(Facsimile)
Please see also our latest press release: A Genentech Shareholder has filed a Lawsuit against Roche over the Takeover Attempt - url:
http://www.news4press.com/1/MeldungDetail.asp?Mitteilungs_ID=376940
Background:
On July 21, 2008, Genentech announced that it had received an unsolicited offer from Roche. The Company’s press release stated:
South San Francisco, Calif. -- July 21, 2008 -- Genentech, Inc. (NYSE:DNA) announced today that it has received a proposal from Roche to acquire all of the outstanding shares of Genentech stock not owned by Roche at a price of $89.00 in cash per share. Currently, Roche owns approximately 55.9% of the outstanding shares of Genentech. Genentech expects that a special committee of its Board of Directors, composed of the independent directors, will be convened promptly to determine what action to take with respect to the proposal.
Roche issued a similar press release from Basel, Switzerland, stating in part:
“Roche (SWX: ROG.VX RO.S OTCQX RHHBY), a world-leading healthcare company, announced today that it has proposed to acquire the outstanding publicly held interest in Genentech (NYSE: DNA), a leading biotechnology company, for US$89.00 per share in cash, or a total payment of approximately US$43.7 billion to equity holders of Genentech other than Roche. Roche acquired a majority in Genentech in 1990 and currently owns 55.9% of all outstanding shares.”
Roche is a majority and controlling shareholder of Genentech. Roche currently owns approximately 56% of Genentech’s common stock. Genentech’s current offer represents just a 8.8% premium – below what analysts say are comparable premiums in similar biotechnology takeover cases.
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According to our legal specialists the one of the most interesting – and troubling – aspects of the Roche offer concerns a contractual provision that Roche negotiated with Genentech in 1999 is, that the provision allegedly eliminates the ability of Genentech shareholders to block a deal. Our legal specialists say, that generally, Delaware law (the state of Genentech’s incorporation) requires that shareholders be allowed to vote whether to approve any transaction involving a sale of all or substantially all of a company’s stock or assets. The Roche/Genentech Affiliation Agreement from 1999 allegedly states that if Genentech’s shareholders vote against a merger of the two companies, then Roche can acquire Genentech anyway, with the sole issue being the price. The Affiliation Agreement provides that, under such circumstances, a special committee of Genentech independent directors would choose two investment bankers who would determine the price to be received by Genentech shareholders.
Our legal specialists specializing in securities litigation say that such a provision should not be enforceable because it contravenes the general principle that shareholders must be given the right to determine whether to approve a merger. Giving them a vote – but then allowing the company to be sold even if the shareholders vote “no,” violates corporate law according to the lawyers.
Commenting on the Roche offer, Franz Humer, Chairman of the Board of Roche, said, “Our long and successful participation in Genentech has provided great benefits to both of our companies and shareholders. It has resulted in one of the biggest success stories in the healthcare industry. Roche’s significant investment in Genentech over many years has helped it to focus on innovation and long-term projects, leading to some of the most important breakthroughs in the treatment of cancer and other life-threatening diseases. The transaction will create a unique opportunity to evolve Roche’s hub-and-spoke model into a structure that allows us to strengthen the focus on innovation and accelerate the search for new solutions for unmet medical needs. Combining the strengths of Roche and Genentech will create significant value and result in benefits for patients, employees and shareholders.”
According to the legal specialist Roche’s offer grossly undervalues Genentech and does not represent fair value for Genentech’s common stock. Some stock analysts have already opined that Roche may have to raise its offer to as high as $120 to secure approval.
According to the legal specialist the Genentech board of directors is not independent and not capable of objectively considering the Roche Offer. In fact, Genentech has already stated that it will need to form a special committee to evaluate the Roche Offer. Roche similarly conceded that the current Genentech board is incapable of objectively reviewing its offer and that its designees to the Genentech board should have no involvement in the review of the Roche Offer. As a result, Roche only directed its offer to Sanders, Reed and Boyer in Roche’s July 21, 2008 letter to such directors announcing the offer. Roche’s July 21, 2008 press release stated:
“Roche expects that the Genentech Board of Directors will establish a committee consisting solely of independent directors to evaluate Roche’s proposal with the assistance of independent outside financial and legal advisors. Genentech Board members who are employees of Roche will not participate in the evaluation of the proposal.”
Roche’s offer has been met with skepticism by Wall Street analysts as highly inadequate. Andrew Weiss, a pharmaceutical analyst at Bank Vontobel in Zurich, describes the deal as a reverse takeover. While Roche''s market value of $152 billion exceeds Genentech''s $95 billion market value, and while Roche''s 2008 expected revenues of approximately $44 billion are more than triple Genentech''s, Genentech''s super-productive research and development machine is responsible for much of Roche''s success. Genentech drugs accounted for nearly one third of Roche''s 2007 revenues of $44 billion. "It''s about turning Roche into a megasized Genentech," says Weiss.
Upon announcement of the Roche bid, Wall Street drove Genentech’s stock price up significantly above Roche’s $89 offer, thus strongly signaling Wall Street’s belief that Roche’s offer is inadequate and that Roche is likely to have to increase its offer to succeed. The Company’s stock traded as high as $94.19 on July 21, 2008 and closed at $93.88.
With a slew of clinical trial results expected in the next 18 months, analysts expect Genentech''s share price could soar on the back of positive data. Genentech''s Avastin is in clinical testing as a secondary treatment for colon and breast cancer, and Rituxan is being investigated as a possible lupus treatment. Some analysts believe positive outcomes could bring Genentech an additional $5 billion in peak sales for Avastin alone. Genentech is capable of generating tremendous revenues by pairing Genentech''s therapeutics with diagnostics that tell doctors which patients can benefit. This is the breakthrough Roche achieved with Herceptin.
Roche’s offer, at a mere 8.8% premium to Genentech''s closing share price on July 18, has been described as highly inadequate. It significantly underestimates the pipeline potential of the U.S. biotech. "We believe Roche is attempting to capture Genentech''s significant future growth on the cheap," Oppenheimer analyst Bret Holley wrote in an investment note. With $10 billion in free cash and a further $5 billion in securities, Roche has the financial strength to increase its offer. "If all [Genentech’s] trials . . . succeed, [Roche’s acquisition of Genentech] will be a steal," Vontobel''s Weiss says.
If you hold Genentech, Inc (NYSE:DNA) stock, please contact the Shareholders Foundation, Inc immediately!
EMail:
Mail@ShareholdersFoundation.com
or Call us TODAY!
Phone: +1-(858)-779-1554
UK: 0044 (020)-3006-2734
or send us your information by mail /facsimile
The Shareholders Foundation
Shareholders Foundation, Inc.
Trevor Allen
3111 Camino Del Rio North - Suite 423 -
92108 San Diego
Tel:+1-(858)-779-1554
Fax:+1-(858)-605-5739
Mail@ShareholdersFoundation.com
