Roche has offered to acquire all outstanding shares of Illumina for $44.50 per share in cash, or approximately $5.7 billion, to strengthen its position in the diagnostics field. The drugmaker noted that the hostile offer, which represents an 18-percent premium to Illumina’s closing share price on January 24, was made after “multiple efforts to engage” with the company.
According to Roche, Illumina has been “unwilling to participate in substantive discussions” and therefore the company decided to make its offer public. The Financial Times, citing two people close to the matter, said that talks between the parties began in early December, with Illumina rejecting a $40 per share offer earlier this month. In December, CEO Severin Schwan suggested that Roche may be open to a deal similar in size to its 2008 purchase of Ventana Medical Systems for $3.4 billion. Schwan indicated at the time that the company was keen to build on the synergies between the pharmaceutical and diagnostic industries.
Daniel O’Day, chief operating office of Roche’s diagnostics unit, noted that the acquisition of Illumina would “strengthen” its current offerings, adding that “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.” Meanwhile, analysts at Bryan Garnier said the deal would “help Roche sustain its leadership position in targeted therapies, which we consider as highly promising.”
Schwan remarked that the company is still “willing to engage in a constructive dialogue,” adding that “it is our strong preference to enter into a negotiated transaction with Illumina.” However, he indicated that the company had no intention of raising its bid. The drugmaker noted that the current offer represents a 64-percent premium to Illumina’s stock price on December 21, the day before it said market rumours surrounding a potential transaction lifted Illumina’s share price significantly higher. Roche added that it plans to nominate a slate of candidates for election to Illumina’s board at its annual meeting.
In response to the offer, Illumina said its board of directors will “thoroughly review” the proposal before making a recommendation to shareholders.
Commenting on the offer, Oddo Securities analysts said it was “very generous,” although Deutsche Bank analysts said the diagnostic company’s earnings were forecast to grow strongly in the coming years. “The folks at Illumina are a very optimistic bunch,” remarked Leerink Swann analyst Dan Leonard, who suggested that another bidder for the company was unlikely to appear. “Their stock was nearly $80 seven months ago, so they’re probably anchored to an entirely different number,” Leonard commented.