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On the internet Sunday night...
Roche is bidding 89 dollars a share to take over the rest of Genentech. It presently owns 55% of the company.
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Eerie. Both Morningstar and Zacks have had this valued right at $89 for a while now (at least since mid $60's).
Well, guess I will get out today...that was a short run!
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Since Roche is already a 55% owner of Genentech, it is hard to know how much of a premium would be appropriate. Consider that:
(1) 55% of the premium paid will come back to Roche as 55% owner of Genentech;
(2) How can Genentech say no? If it comes to a vote, 55% will already be on the yes side. How much would they require, by law? Is it 50%, or more?
(3) Not only do they own 55% of Genentech, they also have all the rights to non-US use of DNA drugs, although they have to pay royalties. It's not like Ventana, where they are starting from a clean slate, they already have certain contractual privileges that they shouldn't have to pay for again.
(4) Although I am not familiar with the details of the original spinoff of Genentech by Roche, my recollection is that DNA cannot sell shares to decrease the Roche ownership position much below 55%. In that case, selling to another (higher) bidder is already not an option, so Roche has a much stronger negotiating position, and lesser need of upping the price, than would be the case in the takeover of an independent company like Ventana, and a DNA investor could notd argue that a premium takeover was part of DNA's prospects.
Of course DNA holders might hope for more, but from Roche's perspective, a 10% premium seems reasonable.
Regards, BP
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I bought DNA around 6 years ago I believe. Right now it is trading at about $93.50. Iam unsure of the dynamics of these things. Would it be good to sell now and take the $93.50 or wait and see what Roche might take their bid up to or .... ? I know there is some strategy to this.
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You could sell half now and see how it goes.
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<snip>
...Roche executives met with investors and analysts Tuesday in New York to further explain the rationale for taking Genentech private and to defend their $89-a-share offer. Roche executives were to meet with Genentech management, including CEO Art Levinson, on Tuesday night.
The consensus appears to be that Roche will have to raise the offer to make the deal work.
"Minority shareholders want to be treated fairly; $89 a share is not fair value,"...
</snip>
from: http://www.thestreet.com/story/10429721/4/what-now-genentech...
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The first bid is usually not the last and highest bid. Remember, Genentech will be bought for greatly depreciated dollars from a Swiss Franc point-of-view. The bid is somewhat friendly since Roche already owns 45% of Genentech.
For the bid to be successful, the price is likely to top one hundred dollars per share. I was a Venture Capital investor in Genentech both through a Kleiner-Perkins Limited Partnership, Kleiner-Perkins II, and as a direct side-by-side investor.
When Genentech went public, Tom Perkins said to me: "Don't ever sell this one. Genenteck is a buy and hold forever investment." - IMPO*, Tom was right.
Kahuna,CFA
*IMPO = In My Professional Opinion.
Copyright Kahuna,CFA 2008 - Permission granted to quote within TMF web-site with proper MLA citation. All other rights reserved.
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"Don't ever sell this one. Genenteck is a buy and hold forever investment."
Does this apply even after Roche buys them?
For me, the fun of owning Pixar went away when it became Disney.
But maybe fun is not the point.
-1A
has no professional opinion
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Genentech, thanks to the founding Venture Capital firm, Kleiner-Perkins has minority public shareholder-friendly corporate governance provisions. The public non-insider minority shareholders have the right to veto the Roche take-over attempt if the proposed buy-out price is not in their best interests.
I have not yet decided how I will vote my proxy on the shares I own. I have a fair-size position in Genentech, but not enough shares to effect the minority public shareholder's vote on the Roche offer.
For personal reasons, I am likely to prefer Genentech's continued independence as a public company.
Kahuna,CFA
Law Office
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"Roche purchase would fund an exodus of talent."
Yes, this is clearly a concern, but not one that a savey management cannot address. See for example the purchase of Pixar by Disney--I think 2 yrs ago. Retaining people was fundamental to the deal. And they did it.
Others can if they try. But not if they don't make the effort.
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