Roche offers $44bn for US ally Genentech in biggest biotech bid

Healthcare giant Roche has taken advantage of the weakness of the dollar and launched a full takeover bid for the US biotech group Genentech worth $43.7bn (£21.8bn), its largest-ever attempted acquisition.

The Swiss pharmaceutical group yesterday made an $89 per share offer to buy the 44.1 per cent of Genentech it does not already own, after almost 20 years as its majority partner.

It would be the largest offer for a biotech company, according to data group Thomson Reuters, dwarfing Amgen's $16.8bn take-over of Immunex in 2001.

Franz Humer, Roche's chairman said the move was essential for the company to become stronger, "if we are to not only maintain but extend our position in the face of growing challenges and pressure on prices".

A spokesman for the group said there were various reasons for the deal including the weak dollar, a need to rationalise the complexity of the businesses, and Genentech's development from a biotech venture to an organisation employing over 11,000.

While some analysts backed the move for the rationale behind the deal, Cazenove said the group would have to pay "significantly" more to land the asset.

"Considering the low premium, an offer at this level is highly unlikely to succeed. We expect Roche will have to make a significantly higher offer," it added.

Mr Humer outlined the plan in a letter sent yesterday to Genentech's independent directors. He said: "Combining Genentech and Roche will maximise the potential performance of the companies and is in the best interests of Roche's shareholders."

It said a deal would improve efficiency as it reduces complexity, and boost scale in the US, with synergies of up to $850m targeted for the first year after completion. The merged group would be the seventh largest pharmaceuticals company in the US, with 25,000 employees and generating $15bn annually.

Roche said it intends to finance the acquisition through a combination of its own funds and debt financing, saying it "is confident that it can raise the necessary debt financing to consummate the proposed transaction".

Genentech said it had received the proposal yesterday, but declined to comment further.

Roche took its majority stake in Genentech in 1990. Mr Humer said the partnership has been "one of the biggest success stories in the healthcare industry", which has led "to some of the most important breakthroughs in the treatment of cancer and other life-threatening diseases".

News of the deal overshadowed Roche's results, as its first half profits fell 2 per cent to Sfr5.75bn (£2.8bn). The results were hit by loss of income from its influenza drug Tamiflu.