Roche Favors Deals Up to $7 Billion Over Buybacks: CFO

Roche Holding AG favors acquisitions of as much as $7 billion over spending cash on share buybacks, Chief Financial Officer Alan Hippe told Bloomberg Industries analysts at a meeting.

The company is looking for innovative technologies valued at $6 billion to $7 billion, including gene sequencing, Bloomberg Industries wrote in a note to clients today, citing Hippe. Roche, based in Basel, Switzerland, also is seeking smaller product deals to complement its existing offerings, the CFO told the analysts.

Illumina Inc., the U.S. maker of DNA sequencing equipment that Roche tried unsuccessfully to buy this year, has a market value of about $6.4 billion, based on yesterday’s closing price. The shares gained today after Swiss newspaper L’Agefi said Roche may have agreed with the company’s management on a $66-a-share offer, compared with its original unsuccessful bid of $51 a share earlier this year. Such a bid would give Illumina a value of about $8.1 billion. In the U.S., Illumina rose 7.1 percent to $55.85 at 8:21 a.m. New York time.

L’Agefi cited information that “appears trustworthy though couldn’t be verified.” Alexander Klauser, a spokesman for Roche, said the company doesn’t comment on “market rumors.” Martin Voegtli, an analyst at Kepler Capital Markets, said he thinks the reported bid is “highly unlikely.”

Roche’s acquisition strategy and potential spending range is similar to those of other pharmaceutical companies such as Sanofi and Roche’s cross-town rival Novartis AG, Bloomberg Industries wrote. Roche is the most leveraged large drugmaker, with a net debt-to-assets ratio of 25 percent, according to Bloomberg Industries. The company plans to use cash to pay down debt with a goal of 15 percent leverage, Hippe said.

Roche fell 1 percent to 185.20 Swiss francs at 2:12 p.m. in Zurich trading today.

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