Genentech rejects Roche's $43.7-billion takeover offer as too low

Biotechnology giant Genentech Inc today rejected a $43.7-billion takeover bid from its majority shareholder, Roche Holding AG, as too low, while saying it would be open to a higher proposal. Genentech of South San Francisco, California, is the world's second-biggest biotechnology company after Amgen Inc.

The $89-a-share offer in July for 55.9 per cent of Genentech ''substantially undervalues the company,'' a committee of Genentech directors said today in a statement. They would consider a ''proposal that recognizes the value of the company and reflects the significant benefits that would accrue to Roche as a result of full ownership.'' (See: Roche makes a $43.7-billion bid for Genentech)

Roche's offer is at an 8.8-per cent premium to the closing price on 18 July, the last trading day before the offer was announced. However, at present the stock rose 75 cents to $98.60 in early New York Stock Exchange composite trading. Roche rose 2.8 Swiss francs, or 1.5 per cent, to 188.2 francs in Zurich trading.

''Roche continues to believe its proposal is fair and generous and has no further comment at this point,'' the company said in a statement.

Dr. Charles Sanders, chairman of the Genentech special committee, said, ''The special committee is confident in the company's strong financial and clinical momentum and its uniquely productive R&D capabilities, which will continue to enhance shareholder value. In addition, we look forward to the company maintaining its successful relationship with Roche, regardless of ownership structure.''

Genentech's rejection followed criticism by investors and analysts that Roche, the world's largest maker of cancer drugs, was trying to get a bargain on the 44.1 per cent of Genentech it doesn't already own. Genentech's leading US product, Avastin, is being tested against 30 different malignancies and may become the first-choice drug against colon tumors if it's successful in studies to be released early next year.

The Swiss company said in July that the proposed takeover would cut costs and boost its profit from Genentech medicines. The purchase had the backing of the Oeri and Hoffman families, who control the company, Roche said. They are heirs of Fritz Hoffmann, who started F Hoffman-La Roche Co. in 1896.