(Updates with unchanged Roche guidance, details of reorganisation)
BASEL (Thomson Financial) - Roche Holdings AG said has proposed to acquire
the outstanding publicly held interest in Genentech Inc. at $89.00 per share in
cash, or a total payment of approximately $43.7 billion to equity holders of
Genentech other than Roche. Roche acquired a majority in Genentech in 1990 and
currently owns 55.9 percent of all outstanding shares.
Roche expects the combination to generate annual pretax cost synergies of
approximately $750 million to $850 million, it said.
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.
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.
The offer represents a premium of 8.8 percent to Genentech's closing price
of $81.82 on July 18, 2008 and a one month premium of 19.0 percent to
Genentech's closing price of $74.76 on June 20, 2008, Roche said.
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, NJresearch and development organization.
Roche's Pharma commercial operations in the U.S. will be moved from Nutleyto
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.
Roche's manufacturing in Nutleywill be closed and support functions, such as
informatics and finance, will be consolidated.
The combined entity will be the seventh largest U.S. pharmaceuticals company
in terms of market share. It will generate more than $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, it added.
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