Roche Raises Genentech Bid

Roche Raises Genentech Bid to $93/Share

A few minutes ago, Roche (RHHBY) announced that it has increased its offer price for all outstanding publicly-held shares of Genentech (DNA) to $93 per share, as well as extending the offer to 12:00 midnight EST on Friday, March 20, 2009.

All other terms and conditions of the tender offer remain unchanged. The new offer just released is up $6.50 per share and values Genentech at approximately $100 billion total. By comparison, Pfizer (PFE) has a market value of approximately $85 billion.

Roche is raising its bid based on the poor turnout of the tender offer so far. As of March 5, 2009, Roche noted only approximately 500,000 shares have been tendered at the $86.50 previous offer. Roche currently own roughly 57% of the outstanding shares and needs to acquire at least 90% for the tender to be successful.

The new $93 bid is significant better than the previous "low-ball" offer that Roche put forth earlier in the year, but still falls short of our $95 target price. We continue to rate the shares a Buy.

Our advice is that investors do not tender to Roche prior to the release of the Avastin adjuvant colon cancer resulted expected in June 2009. There are several additional catalyst on the horizon for Genentech, including FDA action on Avastin in glioblastoma (May 2009) and renal cell carcinoma (August 2009) that could work to push Roche's bid even higher.

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