Friday, January 30, 2009

Roche Goes Hostile

"$42 billion? Neverrrrrrrrr!"

Has Roche's move to offer $86.50 per share of Genentech in an all-cash tender offer essentially negated all the happy noises the Big Pharma has been making about the Genentech culture, its scientists, the high level of autonomy Genentech would enjoy as part of the Roche, er, empire?

It's hard to see how those assurances are still credible since a deal for the biotech has not emerged from months of negotiations, and yet Roche has decided on this course of action. The Roche release announcing the tender offer is here, and Reuters picked up the story early this morning, here.

Cutting the original offer by nearly $2 billion and taking it public has got to grate on Genentech management and employees. We observed back in the summer that Roche's original offer was largely a consequence of the (increasing) price of Genentech's independence and the sunsetting of the deal that created much of Roche's (ex-US) revenue. Fast forward six months and the economy has worsened, Genentech isn't capitulating in negotiations, and the lure of operational efficiencies and consolidating the biotech's US revenues is too strong.

When the deal was still pseudo-friendly, the big question was whether Roche was risking killing the goose that had laid its golden eggs for so long. Now that it's openly hostile, we see that Roche is more than willing to take that risk. How will it turn out? We don't pretend to know--but Roche does have experience in waiting out its prey, just ask Ventana.

Our full coverage of the Roche/Genentech combination from 2008 is available here. We'll have more to say as the deal develops but we'd love to hear your thoughts in the comments.

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