Roche Readies for Messy Illumina Takeover Battle

By FOXBusiness

A day after gene sequencing company Illumina (NASDAQ:ILMN) rejected a $5.7 billion hostile bid from Roche, calling it "grossly inadequate," the Swiss drugmaker says it is gearing up for a long takeover battle.

Roche, which offered to buy Illumina for $44.50 a share in January, said it will nominate independent candidates for election to Illumina’s board and propose other actions for shareholders to consider at its 2012 annual meeting.

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If successful, Roche-nominated directors would comprise a majority of the Illumina board, making it much easier to commence an acquisition.

“It remains our preference to enter into a negotiated transaction with Illumina and we stand ready to commence discussions at any time,” Roche CEO Severin Schwan said in a statement released Wednesday.

The company, whose offer represents a premium of 64% over Illumina’s closing price on Dec. 21, the day before reports first surfaced about the deal, reiterated its disappointed that the board “refuses to engage” in discussions.

It already raised its bid once in early January, first offering $40 a share on Jan. 3, according to regulatory filings.

But Illumina, whose board unanimously rejected Roche's offer, has already adopted a “poison pill” defense strategy and told shareholder to not tender their shares to Roche.

The company's profit fell 31% in 2011 to $86.6 million, or 62 cents, despite a 17% increase in revenue as the company's expenses shot up on restructuring activity.

But it forecast on Tuesday a fiscal profit of $1.40 to $1.50 on sales of $1.1 billion to $1.18 billion in 2012, both above Wall Street's view of $1.39 a share on $1.1 billion in sales.

Illumina continues to stand by its view that Roche is not properly valuing the growth potential of its business, including new products it currently has in development.

It claims Roche's bid was an attempt to take advantage of a dip in its share price at the end of last year as worries mounted over research funding.