Roche's Acquisition of Gentech

Topics: Mergers and acquisitions, Genentech, Corporate finance Pages: 2 (549 words) Published: October 7, 2012
Reasons for takeover:
* Genentech is seen as a very healty company. Eventhoug it doesn’t pay out any dividends it is always more profitable to hold 100 % of something good instead of 56 % of something good. * Majority of shares, but still a minority of representation on the board. Even though the structure before takeover meant that Roche’s directors need to approve of big decisions, it still means that they can only block decisions but can not take decisions themselves. * Roche’s share becomes smaller and smaller because employees, who will be loyal long term stockholders, exercise their stockoptions * There is little natural growth in the pharmaceutical market at the time. In order to keep on being a competitive player, growth is realised by mergers and acquisitions (Phizer as example) * Genentech’s products are responsible for a big part of Roche’s total sales (exhibit 8). This in combination with he absence of complete control exposes Roche to the risk that Genentech might move it’s own way. * There is a lot of natural growth in the biotechnological industry. Even so much, that Genenteh migth grow into direct competition with Roche. If the two frims merge, this would create an ability to collaborate on a woldwide scale. * In 2015 Roche has no exclusive rights to Genentech’s products. It’s product pipeline can then be sold to the highest bidder. This opens up a large risk for Roche. * Merging the two firms give Roche access to the intellectual property of Genentec, allowing for research synergies * Opportunities to create value by cutting costs and stremaline operations $ 750 - $ 850 million per year (eventhough 40 % of this could also be realised without a merger) * Genentech holds a large amount of cash that Roche does not have (direct) access to. If Roche was to take over Genentech it would.

2. Discounted Cash Flow method:

3. The benefits from the synergie are an annuity.
Year| Achievable synergy due to merger|...
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