Roche of Switzerland is preparing a fresh offer for Genentech, the US biotech in which it already owns a 56 per cent stake.
The bid, to be pitched at around $95-a-share, is likely to be placed in front of Genentech’s board ahead of Roche’s year-end figures, due in early February, FT Alphaville understands.
The deal requires debt financing of up to $35bn and, as such, will be heralded as the first substantive sign that corporate lending markets are finally returning to some sort of normality. Rescue deals aside, such a takeover would represent the most significant piece of M&A activity since InBev’s acquisition of Anheuser-Busch was agreed in June last year.
Costing $44bn - or up to $50bn if Roche is forced to go hostile - the Swiss group is prepared to take the radical step of scrapping its own year-end dividend to help fund the deal. The company has around $9bn of net cash currently. With a further $4bn from passing the dividend and $3.4bn sitting in Genentech, Roche is looking for between $30bn and $35bn from the debt markets.
An existing $10bn revolving credit facility is set to be re-signed, while a longer term facility for up to $25bn has been agreed (but not yet signed) with a syndicate of 10 banks, lead by HSBC and JP Morgan. Financiers involved in the deal are said to have been encouraged by the sudden flurry of corporate bond issues over recent days, which have grossed almost $30bn, while the cost of funds to Roche is put at a surprisingly competitive 4 per cent.
Roche is eager to take control of Genentech before the results of key a trial of drug Avastin in colorectal cancer are announced in the summer. A positive result in the trials , known as NSABP C-08, would extend the Avastin franchise could re-set Genentech’s value at a significantly higher level.
Roche has held a majority stake in Genentech since 1990, since when revenues have grown from $400m to almost $12bn. It first bid to buy out minority holders at $89-a-share last July, only to see independent directors reject the terms. While advisers say Roche is prepared to be more aggressive this time around, the Swiss company knows it has to keep Genentech’s entrepreneurial founder, Arthur Levinson, and his band of independently-minded scientists sweet.
But Roche’s patience has clearly been worn a little thin while it has waited for credit market to thaw: advisers recently discussed a dawn raid on Genentech in New York, before rejecting the idea.
A Roche spokesman declined to comment on the matter. The company is being advised by corporate finance boutique Greenhill, while Genentech has employed Goldman Sachs.
Neil Hume, Paul Murphy, and Bryce Elder
Related links:
Genentech rejects $44bn offer by Roche - FT from August
Roche and Genentech - Lex
