Roche Essay

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Roche’s Acquisition of Genentech | | | | Roche Acquisition of Genentech 1 Why is Roche seeking to acquire 44% of Genentech it does not own? From Roche’s point of view, what are the advantages of owing 100% of Genentech? What are the risks? Answer 1: Roche is a majority stakeholder in Genentech and already holds 56% of the company’s stake. It is seeking to acquire 44% of the remaining stake. The main reason for acquiring 44% of Genentech stake is to merge two companies and tap the synergies. As Roche was a majority stakeholder from 1990 and it was one of the most successful partnerships. Although it was a subsidiary of Roche it operated with a great deal of latitude and had a independent culture. Every year less innovative products entered the market. The US FDA considered only 14% of the drugs introduced between 1998 and 2002. The new trend was to grow organically through Merger & Acquisitions. Acquisitions would bring synergies reduce risk and bring growth. Genentech was in biotechnology sector and had shown phenomenal growth. The two companies would not be competitive anymore between each other and they would be able to collaborate on a world scale with a merger. From Roche’s Point of view what are advantages of owing 100% of Genentech? * Roche would benefit from synergies of total $5 billion. The amount would be resulted from savings in manufacturing, development and R&D cost. * 100% ownership would help Roche in facilitation of product development and research. Currently the conflict of interest with Genentech’s minority shareholders prevented them to access desired information * One major reason was Genentech did not pay dividends and its cash and marketable securities were at 9.5 billion dollars in 2008. * There was an opportunity to create an affiliate contract allowing Roche to distribute Genentech drugs like Mag

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