DealZone

Roche basks in Genentech defence

March 3, 2009

roche-hqIt wasn’t quite the market response Genentech CEO Arthur Levinson was looking for.

Levinson and his team worked hard to make the bull case for the biotech group by providing long-term forecasts to prove it is worth far more than Roche is willing to pay. Yet Genentech shares still ended down 4.6 percent, or nearly $4, in line with a grim market on March 2.

Roche investors, by contrast, were in distinctly chipper mood on March 3, marking up the Swiss group’s stock by more than 5 percent. 

Why the skewed response? JP Morgan analysts put it down to the fact that positive news for Genentech is also good for Roche (after all, it already owns 56 percent of the U.S. business) and such news could actually have a bigger impact on the Swiss group because it trades on a much lower multiple.

“Most factors cited by Genentech to highlight the value of the business represent an even greater upside to Roche shareholders, as that upside could be leveraged outside the U.S. and should boost what is currently a much lower Roche valuation,” the brokerage’s analysts adds.

Ironically, one reason Roche lost some of its previous lustre was worry over its multibillion play for Genentech.  

genentech1

Roche is attempting to acquire the 44 percent of Genentech it does not already own for about $42 billion, or $86.50 per share. Most analysts expect it to end up sweetening the offer to clinch the deal.

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