Roche offers to buy out Genentech

By Sam Cage

BASEL, Switzerland (Reuters) - Swiss drugmaker Roche Holding (ROG.VX: Quote, Profile, Research) offered to acquire all outstanding shares in its U.S. partner Genentech (DNA.N: Quote, Profile, Research) for $43.7 billion (21.9 billion pounds) in cash to reinforce its position in cancer medicines.

Roche, which already owns 55.9 percent of Genentech, said on Monday it would offer $89 per share to buy up the remaining stake, but markets bet on an offer higher than the current 8.8 percent premium to the previous closing share price.

Shares in Genentech, the world's largest biotech company by market value, jumped 13.5 percent to $92.90 by 3 p.m. British time, while Roche's stock fell 4.8 percent to 170.90 francs as investors worried about the cost of the move, its largest ever acquisition, and the possibility of having to pay more.

"We would expect Roche will have to make a significantly higher offer if it is to acquire Genentech," analysts at Cazenove said in a note.

The modest premium offered by Roche compares with an average of 63 percent for recent pharmaceutical buys of biotech companies, according to Credit Suisse.

Basel-based Roche also said its first-half net profit fell 2 percent to 5.73 billion Swiss francs (2.8 billion pounds).

"The takeover of the innovative oncology powerhouse could really pay off for the Basel company in the mid-term. The timing looks opportune given the current low U.S. dollar," Wegelin analysts said in a note.

Roche's last major U.S. acquisition, snapping up Ventana Medical Systems Inc earlier this year, was only secured with a sweetened offer worth 19 percent more than its initial bid.