Are things getting a bit uglier between Roche and Illumina?
After the Institutional Shareholder Services recommended Illumina shareholders vote against Roche's director nominees at the next Illumina shareholders meeting (April 18 2012!), Roche has sent an open letter to Illumina's shareholders.
Roche took 4 days to deliver the letter after ISS issued its recommendation.
To sum up the long letter, Roche emphasizes that the offer is lucrative and Illumina shareholders should think carefully because of the "uncertain future mid increasing headwinds for Illumina and the broader sequencing sector". In the letter, it seems that Roche is
also open for further negotiation with Illumina on the future of the deal and potential increase in the offer is a possibility.
I don't know whether I should find this amusing or what but Roche said Illumina couldn't be compared with Apple because Apple's products are produced for mass distribution while Illumina's products are "revered" but "serve a much smaller and highly regulated market". I don't know if Roche might have forgotten to mention the possible applications that Illumina's technology could produce in the future given that it is successful. Roche goes to the extend to say that the number of buyers that are waiting for Illumina's products are far less than Apple and basically says that Illumina should not compared itself with Apple when the company addressed to its shareholders.
Roche has gone to length in its effort to acquire Illumina. If a company doesn't understand or value the future of its products, one would wonder why it has gone this far to persuade the shareholders. Roche has initially gave an offer of $44.5 per share. The offer was increased to $51.00 a share. The company also asked to have its candidates elected to Illumina's board of directors at Illumina's 2012 annual meetings. The current Board of Directors has rejected Roche's offer and has advised its shareholders to do the same.
Let's just hope the relationship won't go sour between the two companies. Valeant previously pursued Ista in an aggressive take-over unsuccessfully. Now Ista has been acquired by Bausch&Lomb.
Here is the complete letter that Roche's CEO sent to Illumina shareholders
"
After the Institutional Shareholder Services recommended Illumina shareholders vote against Roche's director nominees at the next Illumina shareholders meeting (April 18 2012!), Roche has sent an open letter to Illumina's shareholders.
Roche took 4 days to deliver the letter after ISS issued its recommendation.
To sum up the long letter, Roche emphasizes that the offer is lucrative and Illumina shareholders should think carefully because of the "uncertain future mid increasing headwinds for Illumina and the broader sequencing sector". In the letter, it seems that Roche is
also open for further negotiation with Illumina on the future of the deal and potential increase in the offer is a possibility.
I don't know whether I should find this amusing or what but Roche said Illumina couldn't be compared with Apple because Apple's products are produced for mass distribution while Illumina's products are "revered" but "serve a much smaller and highly regulated market". I don't know if Roche might have forgotten to mention the possible applications that Illumina's technology could produce in the future given that it is successful. Roche goes to the extend to say that the number of buyers that are waiting for Illumina's products are far less than Apple and basically says that Illumina should not compared itself with Apple when the company addressed to its shareholders.
Roche has gone to length in its effort to acquire Illumina. If a company doesn't understand or value the future of its products, one would wonder why it has gone this far to persuade the shareholders. Roche has initially gave an offer of $44.5 per share. The offer was increased to $51.00 a share. The company also asked to have its candidates elected to Illumina's board of directors at Illumina's 2012 annual meetings. The current Board of Directors has rejected Roche's offer and has advised its shareholders to do the same.
Let's just hope the relationship won't go sour between the two companies. Valeant previously pursued Ista in an aggressive take-over unsuccessfully. Now Ista has been acquired by Bausch&Lomb.
Here is the complete letter that Roche's CEO sent to Illumina shareholders
"
Dear Illumina Shareholder:
Next week, at Illumina’s annual meeting on April 18, you will be able to determine your ability to obtain maximum and certain value for your investment in Illumina. We believe that you, the shareholder, should have the right to choose between Roche’s $51.00 all-cash offer, plus any increase to that offer that negotiations between Roche and Illumina may produce, and an uncertain future amid increasing headwinds for Illumina and the broader sequencing sector.
In a recent letter to shareholders, Illumina pointed out that it has been called “the Apple of the genomics business.” However, there is one glaring difference between Illumina and Apple – Illumina’s MiSeq and HiSeq ARE NOT the iPhone and the iPad. Apple’s revolutionary products were huge and instantaneous commercial successes, appealing to a seemingly endless consumer base around the world. Illumina’s products on the other hand, although “revered by genomics researchers around the world,” serve a much smaller and highly regulated market. And unlike at Apple stores, crowd control of eager buyers has not been a problem for Illumina and not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period.
As a standalone company, Illumina’s future is far from certain. Roche is willing to assume this risk because we believe that a combination with Roche will position Illumina for greater long-term success as part of a larger, more global organization. Roche has the infrastructure, expertise, sales force, and market share required to successfully bring Illumina’s products to the broader Life Science and Diagnostics market and the combined capabilities of our two companies will accelerate the transition of Sequencing into clinical and routine diagnostics. But this will take considerable time and the risks and uncertainties are real – which make our $51.00 all-cash offer a very attractive one and a more than reasonable starting point for negotiations.
Why won’t Illumina engage in substantive discussions and show us their quantitative support for their continually emphasized significant growth opportunities?
As we’ve said before, we are eager to meet with Illumina and see their projections and quantifiable evidence which support the growth claims Illumina is making. Their recent guidance and performance certainly does not. Thus far, Illumina’s arguments regarding the potential for outsized growth in emerging markets and industrial and agricultural end markets have been based solely on malleable and qualitative data. We, as some of your fellow shareholders, are starting to question why Illumina is unwilling to share any real data, including any type of financial projections or a discounted cash flow analysis. Recall that Wall Street research analysts had a median price target of $34.00 per share prior to Roche’s offer – figures that already took their unbiased estimates of Illumina’s growth potential into consideration. Once again we urge Illumina’s Board to engage with Roche and disclose their real projections so shareholders can compare the tangible benefit of the certainty of our cash offer with Illumina's undefined vision of a rosy future.
We believe that if Illumina’s current directors really were determined to maximize the value of your investment they would have engaged with Roche to determine our maximum price by demonstrating the extra value they describe and then let you decide whether you prefer our best offer or their suggested alternative.
Our director candidates will not be guided by any interest other than your interest. They will support a dialogue with Roche, but if in their independent judgment (after consulting the same financial advisors the current board selected and considering all alternatives) Roche’s offer is not the superior alternative they will reject it. Their career credentials guarantee that – and we selected them on that basis.
Roche’s offer provides a valuation for Illumina well in excess of peers and precedents and represents a significant premium to where Illumina would likely trade on a standalone basis
Our offer implies valuation multiples that are higher than all of the company’s publicly traded peers and precedent life science tools transactions. The implied P/E/G of Roche’s current offer is 19% above any P/E/G Illumina has traded at for the past three years and significantly higher than Illumina’s pre-offer P/E/G of 1.51x. We are confident that our offer, and any enhancement of it that would be justified by a dialogue with Illumina, will show clear superiority to any and all alternatives. Why are the present directors afraid to talk to us – they still have the protection of their poison pill.
You, the shareholder, should have the right to choose between our increased cash offer of $51.00 and an uncertain future. choose certainty – vote the GOLD proxy card today!
Let your voice be heard! Send a message to the management and Board of Illumina to engage with Roche by electing our independent director nominees and voting FOR our other proposals. We believe the election of our independent directors and passage of our proposals is the best path forward for shareholders to obtain maximum and certain value for their shares of Illumina.
Complete and return the GOLD proxy card today!
We urge you to complete, sign, date and return the GOLD proxy card today. If you hold shares in your name directly, vote today by phone, Internet, or mail by signing, dating, and returning the GOLD proxy card in the postpaid envelope provided. If you hold shares in “street name,” use the GOLD instruction card to tell your bank or broker to vote for the nominees. If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, the Information Agent for the offer, at (212) 929-5500 or (800) 322-2885 (toll-free) or via email at Illumina@mackenziepartners.com.
Thank you in advance for your support.
Severin Schwan
CEO of Roche Group"
CEO of Roche Group"
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