Illumina Responds to Roche’s Hostile $5.7B Offer to Take Over Illumina

Roche's Hostile Bid to Acquire Illumina for $5.7 Billion

The pharma giant Roche, has an eye on the DNA sequencing star Illumina and wants all of Illumina for its sequencing prowess. In a hostile bid to acquire Illumina, Roche came up with a proposal to Illumina share holders and offered $5.7 billions to acquire all of Illumina. Roche believes that the acquisition of Illumina will help bridge the gap between genomic technologies and routine clinical diagnostics.

Roche said it negotiated with Illumina for a take over in the last couple of weeks and Illumina refused an offer and it unwilling to participate in further discussions on acquisition. Roche said upon acquisition, it will combine its existing Applied Science business with Illumina and move the business area’s headquarters to San Diego, California, USA, where Illumina is now.

Severin Schwan, CEO of Roche Group, said,

Roche’s all-cash offer of $44.50 per share represents full and fair value for Illumina and we expect that Illumina’s shareholders will welcome the opportunity to sell their shares at a significant premium to current market prices. It is our strong preference to enter into a negotiated transaction with Illumina, and we remain willing to engage in a constructive dialogue with Illumina to jointly develop an optimal strategy for maximizing the value of our combined business.

Daniel O’Day, COO, Roche Diagnostics Division said

The proposed acquisition will strengthen Roche’s current offering in the Life Science market by providing complementary solutions to our current portfolio. Our ability to offer a total solution to researchers will help enable the discovery of complex new biomarkers improving drug discovery and the selection of patients most likely to respond to a targeted treatment with high clinical relevance. In addition, by building on Illumina’s capabilities Roche will be able to use its scale, global distribution and diagnostic test development expertise to develop new diagnostic tests that serve patients and customers even more effectively.

In a immediate press release, Illumina responded to the hostile offer by Roche and said Illumina Board of Directors will thoroughly review the unsolicited acquisition proposal from Roche and come up with a recommendation that is best for the Illumina stockholders. Currently, Illumina, Roche’s 454, and Life Technologies are the major players in next-gen sequencing. A successful acquisition of Illumina by Roche will leave the next-gen sequencing field one player short and with not much competition.

Here is the full text of Roche’s letter to Jay Flatley, President and Chief Executive Officer of Illumina, Inc. It is an interesting read.

Dear Jay

While I appreciate the time you have taken to speak with me over the course of the last several weeks, the lack of any substantive progress in our efforts to negotiate a business combination between Illumina and Roche, and your January 18 letter confirming your board’s lack of interest in such a transaction, has led us to decide to publicly disclose our proposal to acquire all outstanding shares of Illumina at a price of $44.50 per share in cash. Accordingly, we will make this letter public simultaneously with my sending it to you.

Roche’s offer price of $44.50 per share in cash represents a substantial premium to Illumina’s unaffected market prices: a premium of 64% over Illumina’s closing stock price on December 21, 2011 – the day before market rumors about a potential transaction between Roche and Illumina drove Illumina’s stock price significantly higher – a 61% premium over the one month historical average and a 43% premium over the three month historical average of Illumina’s share price, both as of December 21. It also represents a 30.1x multiple of Illumina’s projected forward earnings based upon analysts’ current consensus estimates for 2012.

This is a compelling offer and we are confident that your stockholders will find it extremely attractive. We hope that your board will now take the opportunity to negotiate a transaction that will allow your shareholders to realize this substantial value.

We believe that our proposal presents a unique opportunity for Roche and Illumina and their respective stockholders and Roche believes that it is imperative to continue to pursue this matter. The price, with the large premium it represents, is a full and fair one. We have available cash on our balance sheet and borrowings under our credit facilities to complete the transaction and we therefore will not require a financing condition.

As I have expressed to you previously, we are mindful that you and your management team have contributed greatly to Illumina’s success. Roche contemplates continued employment of Illumina’s management and employees following the consummation of a transaction and we are prepared to work with you to develop mutually satisfactory employment arrangements. We intend to continue the Illumina legacy within the Roche Diagnostics Division, and to maintain the Illumina brand. To that end, we intend to combine our existing Roche Applied Science business with Illumina and move the business area’s headquarters to San Diego, California. We believe this approach should be attractive to your management and employees.

Roche has attempted to engage Illumina’s management and Board of Directors in a discussion on the merits of a business combination. Unfortunately, Illumina has been unwilling to engage in any meaningful dialogue on this matter. Therefore, while Roche continues to prefer a negotiated transaction with Illumina, Roche intends to promptly commence a tender offer to purchase all of the outstanding shares of common stock of Illumina for $44.50 per share in cash. Additionally, in view of your board’s response, we plan to nominate a slate of directors and make certain other proposals for the consideration of shareholders at Illumina’s 2012 annual meeting which, if adopted, would result in Roche-nominated directors comprising a majority of your board.
We have engaged Greenhill & Co., LLC and Citigroup Global Markets Inc. as financial advisors and Davis Polk & Wardwell LLP as legal counsel to assist in completing this transaction. If you are willing to fully engage with us, we and our advisors are ready to meet with your representatives at any time to discuss this proposal and to answer any questions you have. We believe that time is of the essence and are prepared to move forward expeditiously by committing all necessary resources to complete a transaction promptly. If you are interested in discussing a possible negotiated transaction, please contact me as soon as possible.

Very truly yours,
Dr. Franz B. Humer
Chairman, Roche Holding Ltd

Trackbacks

  1. […] acquisition effort by Roche to acquire Illumina.  For Illumina, the year 2012 began with Roche’s hostile bid to take over Illumina for $5.7 billion. Although, Illumina immediately rejected Roche’s acquisition bid, Roche […]

  2. […] in 2012, Roche came up with a hostile bid to acquire Illumina for $5.7 billions (and later it went up to $6.5 billions). The long-winding hostile effort effort […]

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