Replies to post #72541 on Biotech Values

[masterlongevity]

DNA : good analysis: agree with 95% of

One question for you, Dew, other?

IF the deal falls through, who do you think will take the biggest hit?

My take: roche will lose some credibility ; genetech will lose some share price value (not much imho)
The roche/genentech relationship has surely taken a hit so how can they go back to being effective partners? Something has to happen.

Where does Novartis play in making something happen? Can genentech make a hostile counteroffer on Roche.

Whatever happens, this is turning into a very noce soap opera and future Harvard MBA case

[DewDiligence]

Re: Roche-DNA / mechanics of the merger

The IB fair-value mechanism would appear to be the only way to prevent Roche from saying 'the shares are worth what we say they are worth,' but you are saying that IB mechanism is unlikely to be triggered. The minority can certainly refuse to hand over the shares at Roche's price: a Mexican standoff.

That’s right—a majority of the minority shareholders can sink the deal by simply declining to tender. I think we’re on the same wavelength but I’m not sure, so let me repeat the two bulleted items from #msg-35243442, both of which are necessary for the investment-bank provision to come into play:

• 1. Roche obtains a majority of the minority shareholders (i.e. >22% of the total DNA shares) in the tender offer but less then the 90% needed for a short form merger; AND

• 2. A majority of the minority shareholders votes against the Roche deal.

As noted in #msg-35243442, it makes little sense for an investor to tender his shares to Roche and then vote against Roche’s terms, which is why the two items above are inherently contradictory.

If Roche fails to obtain a majority of the minority shares in the tender offer, the merger will be considered dead (unless Roche makes a new offer), a shareholder vote will not be held, and the IB provision does not come into play.