Roche intends to commence a cash tender offer for all outstanding publicly-held shares of Genentech at US$ 86.50 per share. Roche, which currently owns 55.8 per cent of the Genentech outstanding shares, expects to commence the tender offer within approximately two weeks.
The offer replaces the public proposal made by Roche on July 21, 2008 to acquire all of the publicly-held shares of Genentech at a price of US$ 89 per share in cash by means of a negotiated merger. After receiving Roche's original proposal, the Board of Directors of Genentech, with the full support of Roche, created a special committee comprised of independent directors to consider and respond to the Roche proposal. On August 13, 2008, the special committee announced its rejection of Roche's proposal. In light of the lack of progress towards an agreed transaction since then, Roche has now decided to make an offer directly to Genentech shareholders.
Commenting on the tender offer, Franz B Humer, chairman of the Roche Group, said, "We intend to create unrivalled benefits for our patients, employees and shareholders by combining Roche and Genentech. We are disappointed that the discussions over the last six months between Roche and the special committee of Genentech have not produced a negotiated agreement. We feel it is now time to give the Genentech minority shareholders the opportunity to decide on our offer. Especially in the current market environment the offer provides an opportunity for all public shareholders to achieve liquidity and to receive a fair price for all their shares."
Severin Schwan, CEO of the Roche Group, said, "This offer does not change our initial plan on how we combine the two companies and operate the new entity. We have great respect for our colleagues at Genentech and we will take the necessary steps to nurture Genentech's innovative and unique science-driven culture."
Following the proposed combination, Genentech's research and early development activities would operate as an independent unit within Roche from its existing campus in South San Francisco, retaining its talent and approach to discovering and progressing new molecules. Roche's Pharma commercial operations in the U.S. would be moved from Nutley to Genentech's site in South San Francisco. The combined company's US commercial operations in pharmaceuticals will reflect the Genentech name, leveraging the strong brand value of Genentech in the US market.
Roche's Palo Alto Virology research and development activities will relocate to South San Francisco, while its Palo Alto Inflammation group will become part of Roche's Nutley, New Jersey research and development organization. Nutley will host two global Disease Biology Areas (Oncology and Inflammation) as well as key functions in Metabolism and will remain an important pillar for the US and Roche's global organization. The structure of the combined company will allow for a diversity of approaches in research and early development, while also strengthening cross fertilization between the companies, leading to enhanced overall innovation within the Group.
Roche currently intends to make the offer conditional upon, among other things, a non-waivable condition that holders of at least a majority of the outstanding publicly-held Genentech shares tender their shares in the offer and that Roche has obtained sufficient financing to purchase all outstanding publicly-held shares and all shares issuable upon exercise of outstanding options and to pay related fees and expenses. If following the consummation of the offer Roche owns 90 per cent or more of the Genentech shares, Roche will seek to consummate a merger with Genentech.
Roche plans to finance the transaction by a combination of its own funds, commercial paper, bonds, as well as a traditional bank financing.
The commencement and completion of the tender offer does not require any approval by the special committee or the Genentech board, and Roche has not asked the special committee to approve the tender offer. The complete terms, conditions and other details of the Roche offer will be contained in materials filed with the US Securities and Exchange Commission when the offer commences.
Greenhill & Co is acting as financial advisor to Roche and Davis Polk & Wardwell is acting as legal counsel in connection with the tender offer.