Mum’s the word on Roche bid financing
At a time when many dealmakers want to prove their ability to fund an acquisition, Swiss drugmaker Roche Holding AG is staying mum on how it would pay for its bid to buy the rest of Genentech.
“At this point we would not give any details or further information on how we arrange the financing and where exactly we stand in the negotiating process,” Roche Chief Executive Severin Schwan told reporters. “I would like to reaffirm that we remain committed to the deal and we aim for a negotiated settlement.”
Earlier this month, Roche was in talks with a group of 10 to 15 banks regarding funding, but talks were characterized as “slow” by bankers close to the deal.
When Roche first made its $89 per share offer in July to buy the 44-percent of Genentech it does not already own, it cited the weak dollar as an attractive incentive. Since then, the more than 10 percent increase in the value of the U.S. dollar versus the Swiss franc has prompted some analysts to question whether the deal would be too costly.
Roche has said, however, the currency changes had not altered its willingness to do a deal. On Tuesday, when Roche reported its nine-month results, it said its strong cashflow in the U.S. was a natural hedge for the Genentech bid.
Genentech rejected the $89 per share offer, saying it undervalued the company. Shares of Genentech traded at $85.59, up $1.33, in midday trading on Tuesday. In a Reuters poll in August, the consensus of industry analysts was that Roche would have to hike its offer to about $107.50 per share, raising the cost of the deal to $53 billion from $43.7 billion.
Rodman & Renshaw analyst Christopher James said on Tuesday he saw $95 per share as a fair value for Genentech, and an acquisition premium would push the price “well above $100 per share.”
That’s a lot to finance, especially at a time when other mega-deals, such as InBev’s acquisition of Anheuser-Busch, have been slow to syndicated funding that was already secured.