Tuesday, February 3, 2009

Roche and Genentech

Roche has announced what it cals a "hostile bid" (hold that thought) for Genentech: $86.50 a share.

Roche, formally F. Hoffman-La Roche Ltd., of Switzerland, is a research-heavy pharma giant.

Genentech is the US (San Francisco) based genetic-research firm (sometimes called the "founder of biotech" as an industry separate from old-line pharma), the one that caused a lot of pop-cult buzz in 1979-80. It was THE hot stock in that era. Indeed, even the buzz from that era seems innocent nowadays.

I remember a Barney Miller episode in which a high-class call girl is in the departments, and Det. Harris tries to wheedle stock tips out of her. She's onto one big stock, but she's keeping mum about it.

"You don't have a lead on the next Genentech, do you?"

"I'm dumping all my Genentech to buy this," she replies. At this his eyes bug out.

But enough for my personal trip down memory lane. Roche has initiated a hostile tender offer for 100% of Genentech. What does this mean exactly? It strikes me as odd, since Roche already owns 55.8% of Genentech. One might naively expect that 55.8% serves as a controlling share, so this is a bit like wrestling with one's own left arm.

The point, though, is that US law offers certain protections for minority owners, and those minorities can make pains in the next of themselves. A majority-owned subsidiary isn't the same thing as, say, one of the parent company's operating divisions.

So far as I understand it, Roche is buying out the nuisance value of that minority stock. It has also lowered its offering price in recent days, to convey the message that irt won't be a roll-over for holdouts. Ouch. That's playing hardball, for a bunch of neutral Swiss yodelers!

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