Is Roche setting its Genentech bid up for failure? The New York Times raises the question today after perusing Roche's amended tender-offer document. In that SEC filing, the Swiss drugmaker changed the language on the so-called "squeeze out" of Genentech shareholders that's allowed under the two companies' affiliation agreement.
As you know, if Roche gets 90 percent of Genentech via the tender, it can force recalcitrant shareholders to sell their shares, provided it follows certain price-setting rules. And as the NYT points out, the amended offer document rules out a minority shareholder vote on the second-step merger. Instead, it says that it will skip to its second option, which is seeking a price from investment bankers. That price is likely to be higher than Roche's $86.50-per-share offer, because the investment bankers are hand-selected by Genentech's special committee--which, you'll recall, recently set an asking price of $112.
So here's the deal: If shareholders know that Roche will immediately squeeze them out post-tender, and they know that the squeeze-out price will be higher than the tender offer, then why would they tender in the first place? We're not gamblers, but even we can see that the upside lies with a refusal to tender. If Roche doesn't get its 90 percent, then it probably will come back with a higher offer. And if it does get the 90 percent, then shareholders who didn't opt in the first time round will get a second chance at a higher price.
- read the NYT story