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Roche attempts $5.7bn takeover of DNA sequencing firm Illumina

31 January 2012
Appeared in BioNews 642

Swiss pharmaceutical company Roche has made an unsolicited bid worth $5.7 billion to takeover US DNA sequencing firm Illumina.

Gene sequencing allows scientists to predict how a patient might respond to a particular drug, leading to interest from the pharmaceutical industry to develop 'personalised' medicines that target specific genes.

Illumina, a major provider of DNA sequencing technology in the US, offers machines that can decode a person's entire genome and Roche, which already supplies diagnostic tests, is the world's largest manufacturer of cancer drugs. It is believed a successful acquisition will strengthen Roche's position in the sequencing and microarrays market, which is seeing a growing demand with increased use of genetic information and techniques in healthcare.

'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', said Daniel O'Day, chief operating officer at Roche Diagnostics Division.

Following Roche's announcement of its intention to make an offer, Illumina's board of directors responded by adopting a strategy to resist a hostile takeover known as a rights agreement, or the 'poison pill'. If a certain number of shares are acquired by any person or group, it allows Illumina's existing shareholders to buy any outstanding shares not bought by the takeover company at a price below fair market value. This move can force a higher offer or can deter a bid because of the higher cost of acquiring the extra shares.

'Consistent with its fiduciary duties, the Illumina Board has taken this action to ensure that our stockholders receive fair treatment and protection in connection with any proposal or offer to acquire the company, including the proposal announced by Roche', said Jay Flatley, chief executive officer of Illumina. This response indicates that its leadership is not convinced of the proposal's value, and that the investors believe the company is worth more.

Roche announced that it was 'disappointed' with Illumina's response, and its decision not to participate in further discussions of the proposed transaction.

'The poison pill would make the tender offer useless, so it's unclear what Roche would gain other than a chance to posture that it's serious', an arbitrage trader, who declined to be named, told Reuters.

This did not deter Roche who announced an official offer, to expire on 24 February 2012. The company maintained that it delivers full and fair value to Illumina's shareholders. Illumina responded by announcing that its board would carry out a review of Roche's unsolicited offer and issue recommendations for its shareholders in due course.

'The point, counter-point of a bid and then poison pill and the back-and-forth just makes this seem like a longer, drawn-out battle', another arbitrage trader who declined to be named told Reuters.

Roche has been forced to raise its offer in similar bidding situations in the past, including its takeover of biotech company Genentech and test maker Ventana, according to Reuters.

As pharmaceutical companies try to harness new technologies to develop into new areas of growth, mergers and acquisitions are seen to be common in the field. Reuters reports that biotech company Amgen has recently agreed to buy Micromet in a $1.6 billion agreement to acquire technology that uses the body's immune system to fight cancer.

Illumina adopts poison pill to stave off Roche
Reuters |  26 January 2012
Illumina Adopts Stockholder Rights Agreement
Illumina (press release) |  26 January 2012
Illumina Board of Directors to Review Unsolicited Acquisition Proposal from Roche
Illumina (press release) |  25 January 2012
Illumina's Board of Directors to Review Unsolicited Tender Offer from Roche
Illumina (press release) |  27 January 2012
Illumina sets response timeline to Roche offer
Reuters |  27 January 2012
Rivals see no need to match Roche's big gene bet
Reuters |  27 January 2012
Roche commences tender offer for Illumina, Inc. for $44.50 per share in cash
Roche (press release) |  27 January 2012
Roche 'disappointed' at Illumina board's response
MarketWatch |  27 January 2012
Roche offers to acquire all outstanding shares of Illumina, Inc. to further strengthen its leading role in diagnostics
Roche (press release) |  25 January 2012
Roche responds to adoption of shareholder rights plan by Illumina Board of Directors
Roche (press release) |  26 January 2012
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