Case Study

The offer: Time Monday, July 21, 2008

Roche offered 89 per share for all shares that it did not currently own

The offer represented 8.8% premium over the previous Friday’s close

It valued Genentech at approximately $100 billion.

The special committee:

Three independent directors

Committee appraised and rejected the offer as inadequate

November, 2008

Committee reevaluated the company

112 to 115 per share

Financial crisis:

All share prices dropped

Concerns:

Alienation of employees and mangers, if Roche were to go for the tender offer

The ability to raise the required debt funding, given the state of the financial markets

At the same time, he felt that the current uncertainty about Genentech’s future would soon begin to damage morale and its ability to hire and retain key employees. Humer was also not sure that Roche would be able to raise the required debt funding, given the state of the financial markets and feedback from many banker

the strategic reasons for the acquisition

, Genentech’s stand-alone value

, the synergies expected from the deal

, and the probable response of Genentech’s board, employees, and shareholders to a take-over bid.

Benefits to Genentech:

The alliance with Roche benefited Genentech in several ways. It provided a stable source of financing for Genentech’s R&D, but allowed Genentech to remain a public company and to continue compensating employees with stock options. It also gave Genentech access to Roche’s extensive marketing and distribution channels, especially outside the U.S.

it was second largest among biotech companies in 2007, behind Amgen, with more than double the sales of its third-place competitor

disadavatges of maintaining the current structure

the product licensing agreement, put in place in 1999 during the period when Genentech was 100% owned by Roche, was due to expire in 2015. This agreement gave Roche the right to opt in to development and to commercialize Genentech products...