Illumina’s Board Rejects Roche’s $5.7 Billion Hostile Bid for Gene Mapper

Illumina Inc. (ILMN)’s board unanimously rejected Roche Holding AG (ROG)’s $5.7 billion bid to take over the maker of gene-mapping tools as “grossly inadequate.”

“The timing of the offer is blatantly opportunistic and does not reflect Illumina’s strong platform of new products and pipeline,” Chairman William Rastetter and Chief Executive Officer Jay Flatley said yesterday in a letter to shareholders.

Roche went directly to shareholders of San Diego-based Illumina in a hostile bid after the company rebuffed its approaches. Owners have until midnight New York time on Feb. 24 to tender their shares at $44.50 each, Basel, Switzerland-based Roche said last month. Illumina has traded above the offer price since Jan. 25, signaling investors expect Roche to raise its bid. The Swiss drugmaker today said it’s “disappointed” with Illumina’s response and is open to negotiations.

Roche, the world’s biggest maker of cancer drugs, said it wants to move Illumina’s gene-sequencing technology from academic research labs into routine medical use. The acquisition would build Roche’s palette of health diagnostics products and potentially allow the company to better target its medicines toward individual patients. Illumina said Jan. 10 that by the end of the year it would market a machine capable of scanning a person’s complete DNA in a day.

Illumina gained less than one percent to $52.15 at 4 p.m. New York time. The shares have fallen 26 percent in the last 12 months.

Takeover Defense

Illumina has bolstered its takeover defenses since Roche made its $44.50-a-share acquisition offer last month, granting investors the right to buy shares at half price, a so-called poison-pill maneuver. The strategy may block an unwanted bid by making it prohibitively expensive.

The company also outlined a “golden parachute” compensation plan for its executives if they lose their jobs within two years of an acquisition, according to a regulatory filing. Flatley would be paid double his annual salary plus a bonus, stock and other benefits valued as of Jan. 27 at $10.7 million. Five other executives would receive benefits valued from $2.6 million to $3.2 million, according to the filing.

In its formal response yesterday, Illumina said Roche’s bid fails to recognize the growth potential from the company’s 60 percent share of the next-generation genetic sequencing market.

‘Scarcity Value’

“Your proposal fails to compensate our stockholders for the intrinsic and scarcity value associated with Illumina’s unmatched leadership position,” Rastetter and Flatley wrote in a letter to Franz Humer, board chairman of Roche.

Roche has said it will nominate a slate of independent candidates for election to Illumina board at the company’s annual meeting this year. Illumina hasn’t yet scheduled a date for the meeting, which has been held in March or April.

“Our highly qualified, independent directors are better positioned to act in our stockholders’ interests than directors selected and compensated by you to advance your own strategic objectives at the expense of our stockholders,” the Illumina executives wrote to Humer.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

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

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