The FINANCIAL -- Roche Holding AG
Thursday increased its unsolicited offer to buy U.S.
gene-sequencing company Illumina to $51 per share, valuing
the company at more than $6.5 billion.
The Swiss drug maker raised its offer from $44.50, saying that based on discussions with Illumina shareholders "we have seen interest to accelerate the takeover process."
"All other terms and conditions of the tender offer remain unchanged," Roche said in a statement.
Illumina responded by saying its shareholders should "take no action at this time."
According to Borsa Italiana - London Stock Exchange Group , Roche original $5.7 billion offer for the San Diego-based company, made in January, met fierce resistance from the target company which rejected it as being too low.
In a letter to Illumina Chief Executive Jay Flatley on Thursday, Roche Chairman Franz Humer said the Swiss drug maker wants a negotiated transaction with Illumina, but added: If you continue to decline to negotiate with us, we will have no choice but to continue our effort to effect a transaction unilaterally.
"We hope that you will agree that our new price presents a very attractive opportunity to your shareholders," Humer added.
Analysts said Roche's sweetened offer had been expected, adding that it reflects Illumina's current share price level and thus may bring an agreed deal closer.
"Roche talked to some shareholders and sees a possibility that there's interest in the offer at this price," said David Kaegi, a Zurich-based analyst with Bank Sarasin, who has a buy rating on Roche. Kaegi said Thursday's move is consistent with Roche's past M&A strategy and the company's history of long and bumpy takeover battles.
"To offer something about 20% lower than what you finally want to pay follows a script in these types of transactions," he said.
Roche has been increasing pressure on Illumina's management to give in, extending the offer's acceptance period twice, after it launched its bid last January. It now runs to 6 p.m. New York time, or 2200 GMT, on April 20 -- two days after Illumina's shareholder AGM at which Roche is aiming to gain control of the Illumina board.
Roche said earlier this month that it is also willing to consider "other options," should the deal fail over price.
Friday's new bid represents a 15% premium to Roche's initial offer of $44.50 per share and about 88% over Illumina's stock price mid-December before rumors of the potential transaction first surfaced.
"The sweetened terms represent a total value of $6.6 billion, and we estimate the value Illumina's business on a stand alone business to be around $43-$44 per share," says analyst Andrew Weiss with Swiss private bank Vontobel, which has a buy rate on Roche. "Hence, it is paying about a $1 billion premium, though we believe Illumina is a great fit for Roche and could enable them to develop more targeted therapies in the future," he said.
The acquisition of Illumina, which makes gene-decoding machines, is a crucial step for Roche on the path to develop targeted therapies, matching drugs to those patients who benefit most from them and helping curb health care costs. Personalized medicine is expected to play an increasingly important role in cancer therapy, where Roche is a market leader.