Analysts were on the money when they predicted Roche would hike up its Genentech offer. Roche announced Friday that it raised its bid to $93 per share, extending the offer until midnight March 20. That's $4 more than its original offer of $89 per share last year and $6.50 more than the most recent bid of $86.50.
But the new offer is exactly the same as the old in one respect: Genentech appears none too impressed. In a release, the company urged shareholders to sit tight while its special committee evaluates the bid. And shareholders have listened in the past; they tendered just 500,000 of the 440 million or so shares eligible for the $86.50 offer.
As you know, Roche has been gunning for the 44 percent of Genentech it doesn't already own, steadily rounding up funds over the past two weeks to complete the buyout. Genentech's board scoffed at the previous bids, saying they "substantially undervalue" the company, and tried to make the case for a $112 asking price.
Zack analysts are advising investors to wait it out, too. The firm says shareholders shouldn't tender until the anticipated data on Avastin use in colon cancer is released, which isn't expected till mid-April. Jason Zhang at BMO Capital Markets wasn't impressed with $93, either; in an investor note, he said that "Roche is yet to offer a fair price that represents Genentech's long-term value." Zhang thinks a $100 to $105 price is more likely.
Some analysts, though, expect the $93 bid to bear fruit. Deutsche Bank, for instance, told investors that the offer is "very fair" and that it predicts most shareholders will tender. RBC Capital Markets said that, given the current bear market and the possibility that the Avastin data might not deliver, the new bid offers "an attractive return."
Of course, Roche execs say the third bid's the charm. "Based on conversations with Genentech shareholders, we believe that there is a strong sentiment to bring this process to a conclusion," chairman Franz Humer said in a statement. "[W]e are increasing our price to US$93 per share to maximize shareholder participation." Over the weekend, he told a Swiss newspaper, "The improved offer will lead to the final break-through." Humer's been confident of a breakthrough all along, though, so we'll take his predictions with a grain of salt. What do you think?