It’s doubtful that Britney Spears’ 12-year-old hit single, Oops! . . . I did it again, entered into Roche’s mind when the firm disclosed a hostile takeover bid to acquire Illumina late last month for $44.50 a share in cash, or about $5.7 billion. Okay, maybe doubtful isn’t the right word. Maybe I should say that there was no chance in the world that Roche even considered this song when describing its takeover bid.
But to those who have followed Roche closely throughout the past few years, the song seems to fit Roche’s attempts to acquire the DNA sequencing company perfectly. The comparison gets remarkably easier when one remembers that back in 2009, Roche acquired U.S. cancer drug maker Genentech using a similar strategy.
Roche ended up acquiring Genentech for about $46 billion in cash – or about $95 a share to acquire the remaining 44% of the company that it did not already own. This move ended a hostile takeover bid that stretched out for months.
Prior to the acquisition, a special committee of the board of directors of Genentech urged the company's shareholders to take no action at that time with respect to the hostile tender offer commenced by Roche to acquire all of the company's outstanding shares not owned by Roche at a price of $86.50 in cash per share, which was $2.50 less per share than what Roche originally offered to buy the company for previously.
So far in the Illumina deal – Roche isn’t having an easy go of it. Illumina's board has adopted a "poison pill" defense strategy against the hostile takeover bid, saying it would trigger a rights agreement if any party bought 15% of its stock.
In addition to the poison pill, Illumina also has a so-called staggered election for its board of directors, which makes it difficult for an outside party to gain control of the board in one year.
Roche may be facing a drawn-out battle after Illumina reported the rights plan, which typically allows a shareholder other than the bidder to buy more shares at a discount, often with the aim of forcing a higher offer or deterring a bid because of the higher cost of acquiring the extra shares.
If anything can be learned from the Genentech deal, it’s that Roche is willing to go the distance. And why shouldn’t the firm do this? If this acquisition comes through then Roche could have a bigger slice of the ever growing personalized medicine pie. Also, it’s not like we haven’t seen the company go a few rounds to complete an acquisition before.
Long and drawn out – been there. Ready to dole out a few billion dollars to complete the acquisition – done that.
It probably won’t be that much longer before Spears’ pop classic is echoing loudly throughout the halls of Roche – well, figuratively speaking that is.