Roche may have to up Illumina bid as it extends tender offer
This article was originally published in Scrip
Roche's hostile takeover attempt of gene sequencing firm Illumina has had a lukewarm response from Illumina's shareholders, forcing Roche to extend its tender offer period. Illumina shareholders now have until 23 March to tender their shares at the unrevised; the offer was previously set to expire on 24 February.
The news could mean that Roche may eventually be obliged to increase its $44.50-per-share offer in order to achieve its goal, with analysts suggesting $60 per share as an acceptable price. Illumina's stock on the Nasdaq Global Select is currently trading at around $51; however, this is a drop from the $55.15 high that the firm's shares reached in January when Roche first tabled its offer (scripintelligence.com, 25 January 2012). Roche has not yet made any move to sweeten its bid.
So far, Illumina shareholders have tendered around 102,165 out of 122.3 million outstanding shares, according to Roche. This gives the Swiss giant just 0.1% of the gene sequencing firm's shares, a far cry from Illumina's biggest shareholder, Capital Research Global Investors, with 11.5%. Other major shareholders in Illumina include Baillie Gifford & Co with 11.3%, Sands Capital Management with 9.1%, and Morgan Stanley Investment Management with 7.5%.
"The extension by Roche was expected," Illumina said in a statement. "An extremely low number of shares have been tendered, consistent with our view – and that of our stockholders – that Roche's offer does not reflect Illumina's unique leadership position, business performance and future prospects."
Illumina has already urged its shareholders to reject the offer, and launched a poison pill defence designed to dilute its own stock (scripintelligence.com, 27 January 2012). For its part, Roche is attempting to gain control of Illumina's board: in January, it announced plans to nominate six "independent" candidates who, if accepted, will give Roche-nominated directors the majority. Roche has also proposed five alternative nominees. In addition, the Swiss firm plans to propose increasing the size of Illumina's board from nine directors to eleven directors, with the resulting vacancies on the board to be filled by Roche candidates
In a further twist, some disgruntled Illumina shareholders have sued the company, accusing it of rejecting Roche's offer based on bad advice from investment bank Goldman Sachs (www.clinica.co.uk, 16 February 2012).
Roche has a track record of biding its time when it comes to hostile takeovers: in 2008, it acquired tissue-based cancer testing specialist Ventana Medical Systems for $3.4 billion, but the deal only went through after seven months of wrangling, with Roche eventually hiking its bid price by nearly 20% (scripintelligence.com, 25 January 2008).