Roche makes a $43.7-billion bid for Genentech

21 July 2008

Switzerland's largest drugmaker Roche plans to acquire the world's second larget bitechnology firm US Genentech Inc, in an all-cash $89 per share deal valued at $43.7 billion, even as it reported a decline in first-half profit as sales of Tamiflu, one of only two drugs available to treat pandemic influenza.

Roche said that its first-half net income fell to 5.73 billion Swiss francs ($5.58 billion) from 5.86 billion francs last year. 

In 1990 Roche had acquired a 55.9-per cent in the San Francisco-based Genentech, the largest  maker of cancer drugs in the US, and would be Roche's largest ever acquisition. Genentech has provided Roche with its best-selling Rituxan, Avastin and Herceptin cancer therapies and the deal will create the seventh-largest drug firm by market share in the US.

The $89-per share offer to buy up the remaining stake, represents a  one-day premium to Genentech shareholders of 8.8 per cent to the company's closing share price on Friday and a one month premium of 19.0 per cent.

Roche expects the transaction to deliver annual pre-tax synergies of $750 -$850 million; and says the expected EPS to be accretive in the first year after closing. It said the transaction will have no impact on Roche's sales and Core EPS targets for 2008 and the company would raise its dividend pay-out ratio for the next three years as it had previously committed.

The combined entity will generate more than $15 billion in annual revenues, Roche said. It is expected to generate substantial free cash flow that will enable it to reduce acquisition-related debt rapidly, invest in further product launches and retain strategic flexibility.