Roche Takeover of Illumnia Begins to Fail

Roche Holding ROG may not be able to purchase Illumnia ILMN without a fight, as the company's board has rejected a takeover bid of $5.7 billion, saying that it is "grossly inadquate." Illumnia had delayed its 4Q 2011 earnings after the unsolicited offer from the Swiss-based pharmaceutical and diagnostic product company. In the meantime, the company reaffirmed its revenue guidance of around $250 million with an EPS of 34 cents, and it hoped to beat consensus estimates for the fiscal year of $1.40 EPS on revenue of $1.1 billion. Yesterday, the company met its guidance with revenue of $250 million, but EPS was a penny higher. The board's first response to the offer was to use a shareholder rights plan to block the offer, so the board's decision to reject the takeover offer is unexpected. CEO Jay Flatley and Chairman William Rastetter wrote a letter to shareholders making their position clear. "The timing of the offer is blatantly opportunistic and does not reflect Illumnia's strong platform of new products and pipeline," the letter said. Hoping to circumvent the board's desire to remain independent, Roche went to shareholders, and asked them to tender their shares at $44.50 by midnight February 24th, New York Time. The stock spiked on the news, and is currently trading at $51.80. Illumnia's board is hoping that shareholders don't take the offer, and has responded by offering investors the right to buy shares at half price while also offering a golden parachute to executives, including a double salary and bonus with stocks and other benefits for Flatley, for a package worth $10.7 million. While Roche wants to move Illumnia's products out of the academic sphere, the company believes that the bid is insufficient given the company's growth potential and market share. "Your proposal fails to compensate our stockholders for the intrinsic and scarcity value associated with Illumina's unmatched leadership position," Rastetter and Flatley said in a letter.