Will Illumina Reject Roche's Raised Takeover Bid?
Source: Aabha Rathee, Wall St. Cheat Sheet (4/17/12)
"Shareholders of the San-Diego based Illumina seem to be collectively siding with their board, which has already rejected two bids from Roche."
Roche's latest bid offers $51 a share, proposes expanding the size of Illumina's board to 11 from nine, and nominates six directors of its own. However, three advisory investor firms sided with Illumina earlier this month and recommended the company's own four nominees to the board, including chief executive Jay Flatley. Roche, the world's biggest maker of cancer medicines, has insisted it won't improve on its newest offer unless Illumina is willing to enter talks. If Illumina manages to keep shareholders on its side in the meeting on Wednesday, Roche will then have to wait until the 2013 meeting.
The bigger and older Roche has tried to convince shareholders by saying it can expand Illumina's current business of making tools for mapping DNA into an increased laboratory use.
"The combined capabilities of our two companies will accelerate the transition of sequencing into clinical and routine diagnostics," the Swiss company wrote in an April 11 letter to Illumina shareholders. "But this will take considerable time and the risks and uncertainties are real — which make our $51 all-cash offer a very attractive one and a more than reasonable starting point for negotiations."
Roche tried twice in eight months before finally buying biotechnology company Genentech in March 2009, paying $46.8 billion for the 44% stake it didn't already own. It also fought long over cancer-test maker Ventana Medical Systems, finally acquiring it in January 2008 for $3.4 billion.
But the possibility of such a long wait has also been making some shareholders drop Illumina stock. Shares closed Monday below Roche's offer price for the first time since the bid was made, falling less than 1% to $44.54 on Tuesday morning. Investors are getting concerned the Swiss company may abandon the deal altogether. -Aabha Rathee, Wall St. Cheat Sheet