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Illumina on Monday rejected Roche’s improved takeover offer, putting the US healthcare group and its Swiss suitor on a collision course ahead of Illumina’s annual shareholders meeting on April 18.
Illumina’s board described the Swiss pharmaceutical group’s latest offer, which Roche raised last week by 15 per cent to $51 a share, as “opportunistic”. The US group added that “even the revised offer does not reflect the intrinsic strength or future prospects of Illumina”.
In a letter to Franz Humer, Roche’s chairman, Jay Flatley, Illumina’s president and chief executive, said the offer, valuing the US diagnostics group at about $6.7bn, “dramatically undervalues Illumina and does not adequately reflect Illumina’s singular position in an industry poised for extraordinary growth”.
Mr Flatley, drawing from Roche’s own remarks, further drew attention to his company’s strong generation of revenues, profit and cash and a track record of delivering continual upgrades in technology to the marketplace.
Contacted at its Basel headquarters on Monday night, Roche declined to comment on the Ilumina’s rejection of its latest move.
The rejection has, however, probably come as a disappointment, given the confident tone of Mr Humer’s own letter to Mr Flatley last week accompanying the improved offer,
Referring to extensive contacts with Illumina’s biggest shareholders, Mr Humer justified Roche’s price increase on the grounds that the Swiss group had detected a strong wish among Illumina shareholders to accelerate the takeover process following “a number of productive discussions” with Illumina shareholders in recent weeks.
“Our revised offer represents a 15 per cent premium to our offer on January 25 2012 and a substantial premium of 88 per cent over Illumina’s closing stock price on December 21 2011, the day before market rumours about a potential transaction between Roche and Illumina drove Illumina’s stock price significantly higher,” he added.
Earlier in March, Severin Schwan, Roche’s chief executive, warned Illumina shareholders their company’s growth prospects had diminished over the past year at a time of slowing demand reflected in lower earnings guidance. He said its shares had only held up because of stock market speculation over Roche’s bid.
He warned that Illumina alone did not have the scale and infrastructure to expand successfully in diagnostics and had little experience in regulated areas.
Roche has launched a tender offer for Illumina shares and put forward new candidates for its board of directors. At the last count, however, the Swiss group had amassed only a minimal proportion of Illumina’s shares.