pharmawire article - 02-Oct-08 21:07 Genentech: Roche financing is 'not a problem', insider says
Story Roche does "not have a problem" with financing the USD 43.7bn bid for Genentech, according to an insider at Roche. Despite reports that Roche is facing difficulties securing the funds, the insider confirmed it has not been a problem. "To me, it's a done deal. It's just a matter of time," he added. An industry executive, who claimed knowledge of the situation, also said that he heard Roche had already secured financing.
The Swiss-based pharmaceutical currently holds 56% of California-based Genentech, which rejected a USD 89 per share bid from Roche in mid-August.
An industry banker with knowledge of the situation said that Roche has lined up a committed credit facility of USD 40bn. The banker said he had heard that Genentech’s special committee, which rejected Roche’s proposal on 13 August, is fighting over the offer price and has come to a disagreement with its financial advisor, Goldman Sachs. The committee's asking price is USD 130 per share, but a more realistic offer will be USD 115 per share, the industry banker said.
But a second industry banker said the process is moving “very slowly” given Wall Street’s meltdown, as compared to previous predictions of a deal being wrapped up expeditiously. He added that Roche had not lined up the financing yet, and is continuing to have discussions with banks. "In this market, you should continue discussions. If they have been talking to Wachovia, then they have a problem," he added.
Regardless, he believed a deal would be struck. “I don’t know if Roche can really go back to what it used to be," the second banker said. He did not believe Roche would walk away from the deal, in light of the current market conditions.
The Roche insider said the main reason for the Swiss drug-maker to move ahead with a Genentech acquisition, instead of maintaining the current partnership model, is due to the fact that Roche will lose its exclusive rights to Genentech's products outside the US in 2015. Roche currently holds the right of first negotiation for external US rights to all drugs in Genentech’s pipeline. The right of first negotiation on drugs ex-US is the most important element of the current Roche/Genentech relationship, the insider said.
Meanwhile, he disagreed that proposing to acquire Genentech was a maneuver to ward off other potential bidders, in light of the recent M&A market frenzy in the sector. Rather, the merger will lead to a significant amount of sales and marketing synergies, he added.
Still, the merger is likely to result in redundancies on both sides in terms of employees, who will likely leave by their own will, due to the potential culture clash, the industry executive and the Roche insider warned. "One of the things Roche has done brilliantly is leaving Genentech alone," the industry executive commented.
The industry executive further said maintaining Genentech's innovative culture after the deal will be tough. "I don’t know if the deal is good or bad for the industry. What I do know, it won’t help the Genentech culture survive," he said.
An oncology executive also agreed that the deal will cause redundancies, and said, "if I was at Genentech, I would be looking over my shoulder to see who is left." The executive, who is in contact with a number of internal sources at Roche, said from his knowledge, the mood has been different over the last few weeks.
Roche is known for being conservative in nature, particularly in terms of its R&D protocol, the oncology executive said. "I think the industry is still surprised over this announcement," he added.
by Kimberly Ha, Nadia Damouni and Sasha Damouni
Source Pharmawire
BIDDER Roche Holding AG
TARGET Genentech Inc
Intel. Type Cross Border
Other
Takeover situations
Countries Switzerland
USA
Intel. Grade Strong evidence
Intel. ID 706908
AI
