A special committee of Genentech's board last night urged shareholders to reject Roche's $42 billion bid to acquire the portion of the company it does not already own for $86.50 a share, saying it substantially undervalues the US biotechnology giant.
The committee said it unanimously recommended that shareholders not tender their shares into Roche's offer, saying the price was “not in the best interest of stockholders, other than Roche and its affiliates.”
“Genentech's strong projected financial performance implies a valuation substantially in excess of Roche's offer price,” Charles Sanders, chairman of the Genentech board's special committee, said in a statement.
“We believe Genentech's exceptional management and team, including its world-renowned scientists, can create far more value for stockholders than Roche has offered,” added Sanders.
The formal response came as no surprise after Genentech rejected Roche's offer last July of $89 per share and last month expressed disappointment that the Swiss drugmaker had decided to take a lower offer directly to shareholders.
Roche Holding AG announced its intention to mount a hostile bid at the lower price in late January and launched the tender offer to acquire the 44 per cent of Genentech it does not own on February 9th.
“We've noted the response by the independent committee. We have laid out our case comprehensively in the tender offer and refer shareholders to the respective documents,” Roche spokeswoman Jennifer Lowney said. “It is now up to the shareholders to decide on our offer.”
Roche previously said that Genentech's banker, Goldman Sachs, had proposed $112 a share as an acceptable price, giving a glimpse of just how far apart the two sides were before Roche decided to go hostile at $86.50 a share.
“We are disappointed that Roche has chosen not to consider an appropriate price range for Genentech's minority shares or to constructively negotiate with our committee, and we must recommend that stockholders not tender their shares as a result,” Mr Sanders said.
Sanford Bernstein analyst Geoffrey Porges said the sides appear to be at an impasse.
“I don't think most shareholders are going to tender,” he said, adding that a price in the mid-90s “is where you get a number of investors interested.”
Genentech's shares rose above $99 last summer after the initial Roche offer, but subsequently fell well below the offer price as the credit crisis took hold, raising doubts about Roche's ability to raise capital for the acquisition.
Genentech shares rose to $85.24 in extended trading from their New York Stock Exchange close last night at $84.55.
Reuters