(Adds portfolio manager comment)
By Deena Beasley
LOS ANGELES Feb 9 Roche Holding AG ROG.VX
launched an hostile offer on Monday to acquire, directly from
stockholders, the 44 percent of biotechnology company Genentech
Inc DNA.N it does not already own for $86.50 a share.
Roche said that Genentech banker Goldman Sachs had proposed
$112 a share as an acceptable sales price.
Switzerland-based Roche also said it intends to exercise
its right to increase the size of Genentech's board -- bringing
its number of directors into line with its majority ownership.
Officials at Genentech were not immediately available for
The latest tender replaces Roche's $89-a-share bid for
Genentech from last July. That proposal was turned down by
independent directors of South San Francisco, California-based
Genentech as inadequate.
It is far from certain whether Genentech shareholders will
buy Roche's argument that $86.50 is a fair price, reflecting
its majority control of this biotechnology success story.
"Based on what I know now -- no. I will not tender my
shares," said Matt Loucks, portfolio manager at Sit Investment
Associates, when asked about the offer.
He said Roche appears committed to concluding the deal,
given that the company's right of first refusal to new
Genentech products is set to expire in a just a few years.
"If I were a shareholder, I would take the $86.50, but I
think a lot of shareholders want to see the data," said
Jefferies & Co analyst Eun Yang, referring to upcoming results
from a trial of blockbuster drug Avastin in colon cancer
patients who have had their tumors removed through surgery.
Success would greatly expand sales of the cancer drug,
sending Genentech shares to $100, while failure would likely
push shares to the low $60s, Yang said.
"Many people think Roche will eventually acquire Genentech
even if the study fails," she said. "From the perspective of
long-term Genentech shareholders, it might make sense to
Roche said in Monday's filing that it thinks the upcoming
Avastin colon cancer trial has a 55 percent chance of success,
while Genentech has put the odds at 61 percent.
Roche said it believes that "there is a meaningful
likelihood that the trial is not sufficient to receive
regulatory approval," and further trial results may be
The company also said it does not agree with Genentech's
assessment of the size of eligible patient populations for
Avastin in the post-surgery setting.
Roche said its offer is dependent on the receipt of a
majority of the outstanding shares not held by Roche or by
Genentech principals, as well as $42.1 billion in financing to
conclude the deal.
The funds will come through a combination of bank loans,
debt securities and other financing, as well as available cash,
the company said.
Roche needs to acquire a total of 90 percent of Genentech
shares in order to complete a merger.
If it falls short of that goal, the company said it will
review options, which include "doing nothing, purchasing shares
in the open market or privately negotiated transactions, making
a new tender offer or seeking to negotiate a merger or other
business combination with Genentech."
Roche said it remains willing to have discussions with the
Genentech special committee about a negotiated transaction.
Shares of Genentech, which closed at $82.70 on the New York
Stock Exchange, were not trading after hours.
The tender offer will expire March 12.
(Reporting by Deena Beasley; editing by Andre Grenon and