Roches Acquisition of Genentech Case Solution

Case ID: 210040
Solution ID: 15789

Words: 2237

Price: $75

Case Solution

Franz Humer, CEO of the Roche Group, must choose whether to mount an antagonistic delicate offer for the openly claimed shares of Roche's biotechnology auxiliary, Genentech. The case gives chances to examine Roche's system concerning Genentech, the upsides and downsides of combining the two organizations with distinctive societies, the estimation of Genentech, and the strategies of an antagonistic delicate offer.

Excel Calculations

Historical Finnacial Statements Data          
Income Statement Data               
Cash Flow Statement Data               

Cash Flow Forecast
Genentech’s Actual and Forecast Free Cash Flow, 2006-2009 (in millions of US$)               

Expected Synergies
Long Term Growth rate
Current Share Holdings
Shares to buy
Terminal Value
Discounted Value
Total Discounted Value
Discounted Value per share

Equity Valuation   
Scenario Analysis of per Share Price                   

PE Analysis
Trailing P/E Multiple, Relevant Value per Share, Forward P/E multiple, Relevant Value per Share

EBDITA Anaysis
Enterprise Value        

Equity Valuation   
Scenario Analysis of per Share Price  

Questions Covered

Why is Roche seeking to acquire the 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?

As of June 2008, what is the value of the synergies Roche anticipates from a merger with Genentech? Assess the value of synergies per share of Genentech. Please use a 9% weighted average cost of capital in your analysis.

Based on DCF valuation techniques, what range of values is reasonable for Genentech as a stand-alone company in June 2008? Please exclude synergies from your valuation and use a a 9% weighted average cost of capital. You can assume that as of the end of June 2008, Genentech held approximately $7 billion in cash, which included investments and securities that were not needed in its daily operations. (Note: Exhibit 10 is a good starting point for this analysis.)

What does the analysis of comparable companies (Exhibit 12, 13, and 14) indicate about Genentech?s value within the range established in question 3?

How has the financial crisis affected Genentech?s value? What changes in valuation assumptions occurred between June 2008 and January 2009?

What should Franz Humer do? Specifically, should he launch a tender offer for Genentech?s shares? What are the risks of this move? What price should he offer? Should he be prepared to go higher? How much new financing will Roche need to complete the tender offer?

How did Genentech’s board and management respond to Roche’s offer of $89 per share?

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