Acquisition Failed Roche Might Be Better Off Without Illumina – Insights in a Blown Deal

Author / Editor: Dr. Jerry Isaacson / Dominik Stephan

After months of efforts to acquire Illumina, Roche gave in last week. A sensible decision, says Dr. Jerry Isaacson, of Global Data, who believes that in the long run, the company might be better off...

Related Company

There will be no white flag from Illumina in the acquisition fight against Roche.
There will be no white flag from Illumina in the acquisition fight against Roche.
(Picture: Roche)

London/United Kingdom – Hoffman-La Roche dropped its bid to buy the gene-sequencing leader Illumina this week after Illumina’s shareholders made it clear at the company’s annual meeting that the terms were inadequate. Roche had made a $51 per share tender offer for San Diego-based Illumina, but will allow the offer to expire today. Late last year Roche offered $40/share for Illumina, eventually increasing the offer to $44.50 and then $51 per share. Despite Roche’s aggressive overtures, Illumina’s management made it clear throughout the process that they had no interest in an acquisition. This was made apparent not only through strongly worded letters, but by Illumina’s refusal to open the books and begin negotiations with Roche. If this had happened, Roche would likely have completed a deal. Illumina shares may attain their promised valuation or may continue in the doldrums, but either way Roche is unlikely to take another bite at the apple.

No Hard Feelings?

The pharmaceutical giant indicated that they would be willing to go higher in a negotiated deal, and they certainly have the means to do so. Considering Roche’s goals for the acquisition, however, going hostile does not make sense. What the company was looking for here was to add a new, innovative business unit that would maintain its own research and development organization. Of course, Illumina also has an established product line and steady revenue stream, so Roche would have become a sequencing company. Taking all of these things into consideration, it is likely that Roche wanted Illumina CEO Jay Flatley and his team to continue to run Illumina. Going hostile would have alienated management and left employees disgruntled.