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Roche steps up pursuit of Illumina

CEO Severin Schwan again appeals directly to gene sequencing firm's shareholders

Illumina urges stakeholders to reject increased bid from Roche

Roche has stepped up its pursuit of Illumina and appealed directly to the gene sequencing firm's shareholders for a second time to accept its acquisition offer.

In its second letter to the shareholders in a week the pharma company urged them to tender their shares and back Roche-proposed independent directors at Illumina's annual meeting in two weeks time.

Roche CEO Severin Schwan said the offer on the table was “full and fair and attractive by every conceivable financial metric”.

“Unfortunately, Illumina's Board of Directors rejected our increased offer on April 2, 2012, and has remained unwilling to engage in any meaningful discussions – despite our willingness to pay a substantial price for your shares.

“After Roche's multiple attempts to engage were rebuffed, we were left with no choice but to bring our offer directly to you, Illumina's shareholders, and provide you with the opportunity to act in your own financial interests,” he wrote.

Roche increased its original bid of $44.50 per share in cash to of $51.00 last week, but Illumina's board recommended shareholders reject the raised offer, calling it a “grossly inadequate price”.

The increased offer valued Illumina at $6.7bn, but the company's president and CEO Jay Flatley said in a letter to Roche's chair Franz Humer that it "dramatically undervalues Illumina and does not adequately reflect Illumina's singular position in an industry poised for extraordinary growth".

The potential for the next generation of lower-cost gene sequencing was highlighted in Illumina's letter to its shareholders, in particular in non-research uses like molecular diagnostics.

"These expansion markets have the potential to more than double the size of Illumina's addressable market from $4 billion to over $8 billion," Illumina said.

But in its own latest letter Roche said its offer factors in Illumina's future growth prospects.

The pharma company has also criticised Illumina's tactics, claiming its board are more interested in their personal roles than the company as a whole.

“By not engaging with Roche, Illumina reinforces the notion that its board and management are determined to preserve their positions rather than maximise shareholder value,” Schwan said earlier this week.

As well as its cash offer, Roche has also nominated several candidates for election to Illumina's board, which would weaken the decision-making power of Illumina's current board. These will be considered at Illumina's 2012 annual meeting on April, 18.

4th April 2012

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