Roche Raises Illumina Bid to $51, Seeking Faster Deal

Franz Humer
Dr Franz Humer, Roche Holding AG chairman. Photographer: Roche

Illumina Inc., the U.S. maker of gene-mapping tools, rose above Roche Holding AG’s increased hostile takeover bid, indicating investors are betting that an even higher offer will come.

Illumina gained 5.1 percent to $52.40 at the close in New York after Roche raised its offer by 15 percent to about $6.7 billion, or $51 a share. Investors have until 6 p.m. New York time April 20 to tender their stock, Basel, Switzerland-based Roche said today in a statement.

Illumina’s technology may help Roche, the world’s biggest maker of cancer drugs, tailor medicines to individual patients. Roche raised the bid after talking to Illumina shareholders in the past several weeks and watching the stock price reaction, Roche Chairman Franz Humer said in a letter to Illumina Chief Executive Officer Jay Flatley.

“It’s increasingly obvious that they want the company and they’re willing to go higher,” said Dan Leonard, an analyst with Leerink Swann & Co.

Today’s increase came in less than a third of the time Humer and Roche Chief Executive Severin Schwan took to raise the bids for their last two large hostile takeovers. In their letter, the Swiss company also repeated a request for San Diego-based Illumina to open negotiations.

Illumina shareholders will decide April 18 whether to replace board members with Roche nominees, which would clear the way for talks from both sides.

Public Urgency

“The urgency is now in the public domain,” Andrew Weiss, an analyst at Bank Vontobel AG in Zurich, said in a telephone interview. He recommends buying Roche’s shares.

Illumina closed yesterday at $49.88, showing shareholders expected Roche to raise the original bid, which valued the company at $5.7 billion, or $44.50 a share.

“If you continue to decline to negotiate with us, we will have no choice but to continue our effort to effect a transaction unilaterally,” Humer said in the letter. “However, I strongly hope that you will either agree to commence discussions with us now or remove all obstacles so that your shareholders can make their own determinations about the adequacy of our increased offer.”

Leerink’s Leonard said Illumina is in a good position to hold out for more. “I think other bidders are unlikely,” Leonard said in a phone interview from Boston. Instead, they can afford not to come to the table and wait for a higher offer from Roche. “As long as their stock is trading higher than Roche’s offer, they don’t have to do anything,” he said. An average estimate of 13 analysts surveyed by Bloomberg give the company a target price of $55.38.

Board Reviewing Bid

Shareholders should take no action on the increased offer, Illumina said today in a statement. The board will review the proposal and make a recommendation, the company said.

Roche fell 1.8 percent to 157 Swiss francs in Zurich.

The drugmaker first announced its hostile bid Jan. 25 after Illumina rebuffed its approaches. Illumina said the initial offer was “grossly inadequate.”

Humer and Schwan have shown more patience in winning over past acquisition targets. They waited seven months to raise their 2007 hostile bid for Ventana Medical Systems Inc., and seven and a half months before they increased a 2008 offer for the 44 percent of Genentech Inc. that Roche didn’t already own.

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