ZURICH (Reuters) – Swiss drugmaker Roche Holding AG (ROG.VX) cut the price of its bid for outstanding shares in Genentech (DNA.N) on Friday, confounding investor hopes of a sweetened offer for the 44 percent of the U.S. biotech company Roche does not already own.
Roche is now making a public tender offer at $86.50 per share in cash, valuing the deal at $42 billion, replacing its initial bid that totaled $44 billion.
"The fact that we are launching a tender offer does not change any of the parameters," Roche Chairman Franz Humer told reporters.
Roche had initially aimed to acquire the remaining shares through a negotiated settlement -- an offer rejected by Genentech -- and decided to appeal directly to shareholders after further talks failed to reach an agreement, Humer said.
Buying Genentech would give Roche control of all revenues for big-selling cancer drugs Avastin and Herceptin, as well as absorbing an attractive portfolio of new medicines.
Roche's new offer comes as a surprise as investors had initially expected the Swiss group to sweeten its bid for Genentech after it rebuffed Roche's initial offer, saying it undervalued the company but it would consider a higher offer that reflected the benefits of an acquisition.
PFIZER RAISES THE STAKES
Initially, shares in Genentech rose to a high of $99.05, but the credit crisis has since raised doubts about Roche's ability to secure the necessary financing to conclude the deal.
And this week Pfizer Inc's (PFE.N) $68 billion bid for Wyeth (WYE.N) (WYE.N), which was backed by a new $22.5 billion loan in addition to cash and stock, upped the stakes further.
Roche made a fresh round of calls to banks after news of that deal emerged, bankers close to the deal told Reuters.
The new offer is at a premium of nearly 3 percent over the Genentech's closing price of $84.09 on Thursday and Roche plans to finance the deal through a combination of its own funds, commercial paper, bonds and bank loans.
Humer said Roche would tap bond markets first, but declined to comment on how the planned financing will break down.
Roche, which currently owns 56 percent of the Genentech outstanding shares, expects to commence the tender offer within approximately two weeks.
Greenhill & Co is financial advisor to Roche and Davis Polk & Wardell is legal counsel for the tender offer.
(Additional reporting by Katie Reid, Sven Egenter and Paul Arnold; Editing by Mike Nesbit and Hans Peters)