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Roche Raises Bid to Acquire Illumina to $6.7B

NEW YORK (GenomeWeb News) – Roche said today that is has raised its cash tender offer for Illumina from $44.50 to $51 per share — an increase of 15 percent — valuing the deal at nearly $6.7 billion.

According to Roche, the new offer represents an 88 percent premium over Illumina's closing stock price on Dec. 21, 2011, the day before the firm's stock price climbed in response to rumors about a takeover by Roche, and a 34.1x multiple of Illumina's projected forward earnings, based on analysts' current consensus estimates for 2012.

Following Roche's initial offer on Jan. 25, Illumina's stock has traded mostly between $50 and $55 per share and closed at $49.88 yesterday.

"Based on our discussions with Illumina shareholders we have seen interest to accelerate the takeover process," said Roche CEO Severin Schwan in a statement, prompting the company to raise its offer. He reiterated that Roche continues to prefer to negotiate a takeover with Illumina's management. "We look forward to the possibility of a swift completion that offers immediate value to Illumina's shareholders," Schwan said.

Roche's new bid comes just a few days after the firm extended its initial $44.50-per-share bid to April 20. It noted at the time that only 144,208 shares of Illumina's stock had been tendered as of March 23.

In a letter to Illumina CEO Jay Flatley today, Roche Chairman Franz Humer said that Roche has had "a number of productive discussions" with Illumina shareholders over the last few weeks and is aware of Illumina's statements that the initial offer of $44.50 was "insufficient to provide a basis for discussions between our companies."

In his letter, made public by Roche, Humer urged Flatley to enter into negotiations with Roche. "We hope that you will agree that our new price presents a very attractive opportunity to your shareholders and that the interests of your shareholders and fiduciary responsibilities of you and your Board require that you agree to enter into discussions with us," he wrote.

"If you continue to decline to negotiate with us, we will have no choice but to continue our effort to effect a transaction unilaterally," he said. "However, I strongly hope that you will either agree to commence discussions with us now or remove all obstacles so that your shareholders can make their own determinations about the adequacy of your increased offer."

In response to the increased offer price, Illumina advised its shareholders to "take no action at this time."

Illumina said that its board of directors, in consultation with its financial and legal advisors, will "thoroughly review" Roche's revised proposal and then make a recommendation to stockholders. Illumina's board rejected Roche's initial offer as "grossly inadequate."

All other terms and conditions of Roche's tender offer for Illumina remain the same as before.

Mizuho Securities analyst Peter Lawson said that in a note published this morning that he didn't expect Roche to up its bid this soon, and he anticipates the Illumina board will reject the new offer as well. "We still anticipate a higher bid, potentially mid-year, to take advantage of anticipated weakness in the space surrounding 2013 NIH/U.S funding," he wrote.

"We view the raising of the bid as a sign that underscores Roche's commitment to successfully acquiring [Illumina]," Robert W. Baird analyst Quintin Lai said in a note.

Oppenheimer's David Ferreiro added that he expects the deal to eventually be completed and said he isn't surprised by a lack of other bidders. He said that other potential suitors, such as Siemens or Abbott, "are likely not willing to try and convert a tools business into a diagnostic one."

In early Thursday trade on the Nasdaq, shares of Illumina were up 4 percent at $52.01.