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Illumina Adopts ‘Poison Pill’ to Block Roche’s Hostile Takeover Offer

Illumina Inc. (ILMN) is granting investors the right to buy shares at half the price in a so-called poison- pill defense, following Roche Holding AG (ROG)’s hostile $5.7 billion bid for the maker of gene-mapping tools.

Shareholders will receive one preferred stock purchase right as a dividend for each common share held as of the close of business Feb. 6, San Diego-based Illumina said in a statement today. Investors will also have the right to purchase $550 in common shares for $275, or, assuming a price of $55 a share, 10 common shares at that price. The rights won’t be exercisable initially, Illumina said. The strategy can block an unwanted bid by making it prohibitively expensive.

“Although not unexpected, Roche is disappointed that the Illumina Board of Directors has been unwilling to participate in substantive discussions,” Basel, Switzerland-based Roche said today in a statement. “Roche’s all-cash offer represents a substantial premium and Roche is confident that Illumina shareholders will see the value of the offer.”

Illumina is bolstering its takeover defenses as Roche prepares an attempt to oust the company’s board. Roche plans to nominate six directors at the annual shareholders meeting and propose a separate vote to expand the size of the nine-member board by two, said a person with knowledge of the matter.

“Illumina is showing its muscles,” said Jean-Francois Comte, co-founder of Lutetia Capital, which manages a $100 million event-driven fund in Paris. “It wants to either reject the aggressor or at least obtain an acceptable price.”

15% of Stock

Should Roche or another bidder become the owner of 15 percent or more of Illumina’s stock, other shareholders will be able to exercise the rights to buy new common stock, diluting the stake of the prospective bidder.

In its response, Roche repeated its plan announced yesterday to take a $44.50-a-share offer directly to Illumina shareholders because the California company’s executives were unwilling to hold serious negotiations.

Illumina shares peaked at $77.88 in July, and have averaged $54.33 in the past year. Illumina fell 4.5 percent to $52.65 at the close in New York.

“The Illumina board has taken this action to ensure that our stockholders receive fair treatment and protection in connection with any proposal or offer to acquire the company, including the proposal announced by Roche,” said Illumina Chief Executive Officer Jay Flatley in the statement.

Time for Shareholders

The rights agreement will “provide stockholders with adequate time to properly assess any such proposal or offer without undue pressure while also safeguarding their opportunity to realize the long-term value of their investment in the company,” he said.

Four of Illumina’s nine directors on the board are due to stand for re-election at this year’s meeting, someone with knowledge of the matter said.

If shareholders support Roche’s proposals, the Swiss company’s nominees would hold a majority of seats on the board, this person said. Illumina hasn’t yet scheduled a date for the meeting, which in the past has been held in March or April.

To contact the reporter on this story: Ryan Flinn in San Francisco at rflinn@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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