2008/7/21 Roche
Roche makes offer to acquire all outstanding shares of
Genentech for
US$89.00 per share in cash
Roche, a world-leading
healthcare company, announced today that it has proposed to
acquire the outstanding publicly held interest in Genentech, a
leading biotechnology company, for US$89.00 per share in cash, or
a total payment of approximately US$43.7 billion to equity holders of Genentech
other than Roche. Roche acquired a majority in Genentech in 1990
and currently
owns 55.9%
of all outstanding shares.
Commenting on the proposal, Franz Humer, Chairman of the Board of
Roche, said, “Our long and successful
participation in Genentech has provided great benefits to both of
our companies and shareholders. It has resulted in one of the
biggest success stories in the healthcare industry. Roche’s significant investment in
Genentech over many years has helped it to focus on innovation
and long-term projects, leading to some of the most important
breakthroughs in the treatment of cancer and other
life-threatening diseases. The transaction will create a unique
opportunity to evolve Roche’s hub-and-spoke model into a
structure that allows us to strengthen the focus on innovation
and accelerate the search for new solutions for unmet medical
needs. Combining the strengths of Roche and Genentech will create
significant value and result in benefits for patients, employees
and shareholders.”
Severin Schwan, CEO
of Roche, said, “We are looking forward to working
more closely with our colleagues from Genentech. We have great
respect for their achievements and we will take the necessary
steps to nurture Genentech’s innovative and unique
science-driven culture. The Genentech Founders Research Center
will operate as an independent unit within the Roche Group to
safeguard a diversity of different approaches and to foster the
long term flow of novel breakthrough medicines. At the same time,
we will be better able to share technologies and expertise in
pharmaceuticals and diagnostics across the Group and broaden the
mutual access to the external innovation networks of both
companies. As Genentech has grown from a research-focused biotech
venture into an integrated pharmaceutical organization, the
transaction will also unlock synergies by leveraging the scale of
the combined operations in the U.S. and improving operational
efficiency.”
Combined company
structured to foster innovation
Genentech will operate as an independent research and early
development center within Roche from its existing campus in South
San Francisco, retaining its talent and approach to discovering
and progressing new molecules. Roche’s Palo Alto Virology research and
development activities will relocate to South San Francisco,
while its Palo Alto Inflammation group will become part of Roche’s Nutley, NJ research and
development organization. Nutley will host two global Disease
Biology Areas (Oncology and Inflammation) as well as key
functions in Metabolism and will remain an important pillar for
the U.S. and Roche’s global organization. With
Genentech’s site in South San Francisco and
Roche’s New Jersey-based campus, the
U.S. will be home to the biggest research and development centers
within the Roche Group.
The structure of the combined company will allow for a diversity
of approaches in research and early development, while also
strengthening cross fertilization between the companies, leading
to enhanced overall innovation within the Group. Roche’s recently adopted Disease Biology
Area approach, which allows five diverse groups to manage their
innovative portfolios, will be maintained and strengthened. This,
together with recent moves into RNAi (Ribonucleic Acid
interference) and delivery technologies, as well as licensing
activities, continues to provide a stimulating environment for
the creation of medically differentiated medicines.
Roche’s Pharma commercial operations in
the U.S. will be moved from Nutley to Genentech’s site in South San Francisco. The
combined company’s U.S. commercial operations in
pharmaceuticals will reflect the Genentech name, leveraging the
strong brand value of Genentech in the U.S. market. The existing
U.S. sales organizations of both companies will be maintained,
resulting in a very strong presence in several specialty areas.
Genentech’s Late Stage Development and
Manufacturing operations will be combined with the global
operations of Roche, achieving substantial scale benefits,
operational synergies and cost avoidance. Roche’s manufacturing in Nutley will be
closed and support functions, such as informatics and finance,
will be consolidated.
Enhanced ability to innovate
The transaction will over time significantly enhance cooperation
and cross fertilization among all research hubs inside and
outside of the combined company. Sharing of technologies (e.g.
RNAi, novel protein architectures), assets (e.g. chemical
libraries), intellectual property (e.g. antibody production),
unique capabilities (e.g. exploratory development, modeling and
simulation) and know-how of the combined research organization
will strengthen the Group’s ability to innovate. Genentech
and Roche have many complementary strengths and assets and
joining their respective experience and knowledge will be
mutually beneficial. The separate research and early development
unit in South San Francisco led by Genentech will be given the
operational freedom to maintain a high level of creativity and
independent decision making. Genentech will also have access to
the full strength of Roche’s worldwide development
organization, thus significantly enhancing its ability to
leverage international clinical trials and expertise. The
combined company will have one of the strongest emerging product
pipelines in the industry, with a number of exciting compounds in
development across key therapeutic areas.
Greater operational efficiency
By reducing complexity and eliminating duplicative functions in
areas like development, manufacturing, corporate administration
and support functions, the combination will result in
well-aligned structures and lean processes. Bringing these
functions into the Roche global structures will reduce complexity
at Genentech’s South San Francisco site,
concentrating Genentech’s focus on innovative research and
early development and science.
Stronger competitive position and scale in the U.S.
The combined entity will be the seventh largest U.S.
pharmaceuticals company in terms of market share. It will
generate more than US$15 billion in annual revenues and will
employ around 17,500 pharma employees in the U.S. alone,
including a combined sales force of approximately 3,000 people.
Including diagnostics, the Roche Group will employ around 25,000
people in the U.S. The company’s combined broad portfolio and
expansive commercial operations will enhance its ability to
successfully commercialize emerging new medicines in the
critical, but challenging and rapidly evolving, U.S. healthcare
market.
Strong financial benefits for both Genentech and Roche
shareholders
The transaction will create significant value for shareholders of
both Genentech and Roche. The offer represents a one day premium
of 8.8% to Genentech’s closing price of US$81.82 on
July 18, 2008 and a one month premium of 19.0% to Genentech’s closing price of US$74.76 on
June 20, 2008.
Roche expects the combination to generate annual pre-tax cost
synergies of approximately US$750 to $850 million. Savings
resulting from this combination will enable the new company to
increase and better focus its investment in innovation.
The transaction is expected to be accretive to Roche’s earnings per share in the first
year after closing. The combined company will generate
substantial free cash flow that will enable it to reduce
acquisition-related debt rapidly, invest in further product
launches and retain strategic flexibility.
No impact on guidance for 2008 and dividend policy
The transaction will have no impact on Roche’s sales and Core EPS targets for
2008, as communicated earlier in the year. Roche also remains
committed to increasing its dividend pay-out ratio for the next
three years as previously announced.
Next steps
Roche expects that the Genentech Board of Directors will
establish a committee consisting solely of independent directors
to evaluate Roche’s proposal with the assistance of
independent outside financial and legal advisors. Genentech Board
members who are employees of Roche will not participate in the
evaluation of the proposal. Roche currently contemplates that the
transaction would be implemented through a cash merger between
Genentech and a Roche subsidiary, pursuant to which all currently
outstanding shares and options of Genentech other than shares
owned by Roche would be converted into cash. The precise terms of
the transaction, as well as the conditions to its consummation,
will be determined through negotiations with the independent
directors. It is anticipated that, in addition to customary
conditions, the merger would be subject to the approval of
holders of a majority of the Genentech outstanding shares not
held by Roche. Roche expects to complete the transaction as soon
as possible following negotiation of a definitive merger
agreement.
Roche has advised Genentech that its sole interest is in
acquiring the remaining shares of Genentech held by the minority
shareholders and that it has no interest in a disposition of its
controlling equity stake in Genentech.
Greenhill & Co. is acting as financial advisor to Roche and
Davis Polk & Wardwell is acting as legal counsel. Roche will
finance the transaction through a combination of its own funds
and debt financing. Roche is confident that it can raise the
necessary debt financing to consummate the proposed transaction.
Following is the text of the letter Roche sent on July 21, 2008
to the independent directors on Genentech’s Board of Directors:
Dear Ms. Reed, Dr. Boyer and Dr. Sanders:
The healthcare industry, particularly with regard to
pharmaceuticals, remains under significant pressure to improve
innovation and to deliver more and better care and products of
high value to society. A combination of these external pressures,
our desire to achieve the best possible results for patients, and
the necessary delivery of acceptable returns for our shareholders
has caused Roche continually to seek ways to enhance innovation
and improve our efficiency of operation and overall performance.
Over the course of the nearly 20 years that Roche has owned a
majority of the stock of Genentech, the two companies have worked
together with great success, to the benefit of all of our
shareholders. During those 20 years Genentech has made great
innovative contributions to patient care. Roche, over the same
period, has progressed from a more diversified healthcare group
to one with a sharper focus on innovation-driven activities
within therapeutics and diagnostics, and importantly on the
interplay between the two in developing personalized solutions
and treatment for patients. While continuing its extraordinary
research efforts Genentech has also, through its success and
resulting growth, gradually come to resemble a major
pharmaceutical company, both in terms of overall revenues and
functional split of employees. As a result, there is today an
opportunity to realize significant synergies by combining the two
companies and integrating their operations while continuing the
Genentech research engine and early development activities as an
independent center under the Genentech name and leadership.
Accordingly, after considerable thought, we have reached the
conclusion that combining Genentech and Roche will maximize the
potential performance of the two companies and is in the best
interests of Roche’s shareholders. In order to
compensate Genentech’s public shareholders
appropriately, we are proposing a cash merger between Genentech
and a Roche subsidiary pursuant to which all currently
outstanding shares and options of Genentech other than shares
owned by Roche would be converted into cash at US$89.00 per
share. This offer would provide a total of US$43.7 billion to
equity holders of Genentech other than Roche.
The price we are offering represents a one day premium of 8.8% to
Genentech’s closing price of US81.82 on July
18, 2008 and a one month premium of 19.0% to Genentech’s closing price of US$74.76 on
June 20, 2008. We believe our offer is both fair and generous and
provides an opportunity for all non-Roche Genentech shareholders
to receive an immediate premium for all of their shares. We note
that while we are committed to a combination of Genentech and
Roche, we will not consider any sale or other disposition of
Roche’s Genentech stock.
The merger would be subject to the negotiation of mutually
acceptable documentation and the approval of a majority of the
non-Roche shareholders of Genentech. We anticipate consummating
the transaction promptly after Genentech shareholder approval has
been obtained.
We understand your role as independent directors and your
responsibility and intention to act in the best interests of the
Genentech shareholders in reviewing and making a decision with
respect to our offer. Accordingly, we expect and encourage you to
retain counsel and financial advisors who are experienced in
these matters and independent of Roche and Genentech. After you
have had a chance to consider our offer with your advisors, we
would welcome the opportunity to discuss our proposal with you
and your advisors. Roche’s investment banking advisor is
Greenhill & Co., and our attorneys are Davis Polk &
Wardwell. They and we will be available to discuss matters with
you and your advisors at your convenience.
Because we wish to be sure that all Genentech and Roche
shareholders are fully informed about the proposal we are making,
we have decided to release this letter to the public. (Attached
is a copy of the press release that is being issued on July 21 at
6:30 a.m. CET.)
I look forward to speaking to you soon and to working together
expeditiously to bring this transaction to a prompt and
successful conclusion.
Very truly yours,
Franz B. Humer
cc: Arthur Levinson, Ph.D.
About Genentech
Genentech is a leading biotechnology company that develops,
manufactures and commercializes pharmaceutical products for a
variety of medical conditions. Based in South San Francisco, CA,
Genentech has been a biotech pioneer for over 30 years. The
Company has a leading franchise in Oncology and also focuses on
Immunology, Tissue Growth and Repair and Neuroscience. Genentech
has one of the most diverse and robust portfolios in biotech.
Roche co-develops and markets Genentech products outside North
America.
About Roche
Headquartered in Basel, Switzerland, Roche is one of the world’s leading research-focused
healthcare groups in the fields of pharmaceuticals and
diagnostics. As the world’s biggest biotech company and an
innovator of products and services for the early detection,
prevention, diagnosis and treatment of diseases, the Group
contributes on a broad range of fronts to improving people’s health and quality of life.
Roche is the world leader in in-vitro diagnostics and drugs for
cancer and transplantation, and is a market leader in virology.
It is also active in other major therapeutic areas such as
autoimmune diseases, inflammatory and metabolic disorders and
diseases of the central nervous system. In 2007, sales by the
Pharmaceuticals Division totaled 36.8 billion Swiss francs, and
the Diagnostics Division posted sales of 9.3 billion francs.
Roche has R&D agreements and strategic alliances with
numerous partners, including majority ownership interests in
Genentech and Chugai, and invested over 8 billion Swiss francs in
R&D in 2007. Worldwide, the Group employs about 80,000
people. Additional information is available on the Internet at www.roche.com.
Roche and Genentech reach a friendly agreement to combine the two organizations and create a leader in healthcare innovation
Rocheは55.8%を保有
Rocheは2008年7月、残り株式の$89.00での買収を提案したが、Genentech はこれを拒否していた。
Roche and Genentech announced today that they signed a merger agreement under which Roche will acquire the outstanding publicly held interest in Genentech for US$95.00 per share in cash, or a total payment of approximately US$46.8 billion to equity holders of Genentech other than Roche. The special committee of Genentech’s Board of Directors has approved the agreement and recommends that Genentech shareholders tender their shares in Roche’s tender offer.
Dr. Charles Sanders, Chairman of the Special Committee of Genentech’s Board of Directors, said: “We believe this is a fair offer for Genentech shareholders, and the Committee is pleased to come to a successful conclusion of this process. We look forward to working with Roche to complete the transaction as expeditiously as possible”.
Franz B. Humer, Chairman of the Roche Group, said: “We are very pleased that we have reached an agreement with Genentech and secured a positive recommendation from the special committee. As stated previously, an agreed transaction offers clear and important advantages for the shareholders of both companies. I am delighted that the intensive negotiations have led to a successful conclusion. Working together, we aim to close the transaction quickly, thus removing uncertainty for employees and allowing us to focus even more intently on innovation and long-term projects. We have tremendous respect for our colleagues at Genentech and look forward to working with them to further accelerate our search for solutions to unmet medical needs”.
Arthur D. Levinson, Ph.D., chairman and chief executive of Genentech, said: “We have had a highly successful partnership with Roche for more than 18 years, and we intend to pursue our shared goal of discovering medications for serious and life-threatening conditions. We look forward to working with our partners at Roche to ensure a smooth transition once the transaction is complete and to continue our mission of serving patients”.
Severin Schwan, CEO of the Roche Group, said: “Roche and Genentech saw the potential of a pharma-biotechnology partnership early on and we are now in an enviable position to expand on the success of our longstanding relationship, which has been a source of immense value for patients, employees and shareholders of both companies. We are excited about working with our colleagues at Genentech and look forward to partnering with them to develop a plan for the successful combination of the two companies”.
Roche will amend its existing tender offer to reflect the increased price and eliminate the financing and certain other conditions to the offer. The tender offer remains subject to the condition that a majority of the public shareholders tender their shares. If the tender offer is completed, Roche will promptly consummate a second-step merger in which all remaining public shareholders will, without the need for further action by any public shareholder, receive $95.00 per share for their shares. Roche and Genentech have also amended their affiliation agreement to permit all shareholders to receive the same increased price in the tender offer and the merger. The expiration date for the offer is March 25, 2009. As of the close of business on March 11, 2009, approximately 2.9 million shares have been tendered pursuant to the offer.
The combined company will be the seventh largest U.S. pharmaceuticals company in terms of market share. It will generate approximately US$17 billion in annual revenues and will employ around 17,500 employees in the U.S. pharmaceuticals business alone, including a combined sales force of approximately 3,000 people.
Research and early development will operate as an independent center within Roche from its existing campus in South San Francisco, retaining its talent and approach to discovering and progressing new molecules. Roche’s Pharma commercial operations in the U.S. will be moved from Nutley, New Jersey to Genentech’s site in South San Francisco. The combined company’s U.S. commercial operations in pharmaceuticals will operate under the Genentech name, leveraging the strong brand value of Genentech in the U.S. market. The existing U.S. sales organizations of both companies will be maintained, resulting in a very strong presence in several specialty areas.
The transaction will provide the opportunity to simplify the structure of the combined organization and maximize the benefits of enhanced scale. Roche has already begun to wind down operations at its Palo Alto facility and will relocate the site’s Virology research and development activities to South San Francisco. Roche’s Palo Alto Inflammation group is in the process of becoming part of Roche’s Nutley research and development organization. Genentech’s Late Stage Development and Manufacturing operations will be combined with the global operations of Roche, achieving substantial scale benefits, operational synergies and cost avoidance. Roche’s manufacturing operations in Nutley will be closed and support functions, such as informatics and finance, will be consolidated with those of Genentech.
Roche expects the combination to generate annual pre-tax cost synergies of approximately US$750 to $850 million. Synergies will be largely driven by reducing complexity and eliminating duplicative functions and processes in areas like late stage development, manufacturing, corporate administration and support functions. Savings resulting from this combination will enable the new company to increase and better focus its investment in innovation.
The transaction is expected to be accretive to Roche’s earnings per share in the first year after closing. The combined company will generate substantial free cash flow that will enable it to rapidly reduce acquisition-related debt, invest in further product launches and retain strategic flexibility.
Additional information about the transaction, including the offering documents, is available at www.transactioninfo.com/roche/.
Genentech’s recommendation to shareholders on Schedule 14D-9 to accept Roche’s offer will be made available today on Genentech’s website, www.genentech.com, and via EDGAR on the SEC’s website, www.sec.gov, and will be mailed to Genentech shareholders.
Greenhill & Co. is acting as financial advisor to Roche and Davis Polk & Wardwell is acting as legal counsel. The Special Committee is represented by Goldman, Sachs & Co. and Latham & Watkins LLP. Genentech is represented by Wilson Sonsini Goodrich & Rosati.
Headquartered in Basel, Switzerland, Roche is one of the world’s leading research-focused healthcare groups in the fields of pharmaceuticals and diagnostics. As the world’s biggest biotech company and an innovator of products and services for the early detection, prevention, diagnosis and treatment of diseases, the Group contributes on a broad range of fronts to improving people’s health and quality of life. Roche is the world leader in in-vitro diagnostics and drugs for cancer and transplantation, and is a market leader in virology. It is also active in other major therapeutic areas such as autoimmune diseases, inflammatory and metabolic disorders and diseases of the central nervous system. In 2008 sales by the Pharmaceuticals Division totaled 36.0 billion Swiss francs, and the Diagnostics Division posted sales of 9.7 billion francs. Roche has R&D agreements and strategic alliances with numerous partners, including majority ownership interests in Genentech and Chugai, and invested nearly 9 billion Swiss francs in R&D in 2008. Worldwide, the Group employs about 80,000 people. Additional information is available on the Internet at www.roche.com.
Founded more than 30 years ago, Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes medicines to treat patients with significant unmet medical needs. The company has headquarters in South San Francisco, California and is listed on the New York Stock Exchange under the symbol DNA. For additional information about the company, please visit www.gene.com.