Case - Roche's Acquisition of Genentech
Questions:
In preparing the case, assume that Genentech has 1,052 million shares outstanding.
1. 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 owning 100% of Genentech? What are the risks?
2. As of June 2008, what is the value of the 'synergies' Roche anticipates from a merger with Genentech? Assess these per share of Genentech using a 9% weighted average cost of capital in your analysis.
3. Based on DCF valuation techniques, what range of values is reasonable for Genentech as a stand-alone company in June 2008? Exclude synergies from your analysis and use a 9% weighted average cost of capital. Be sure to include approximately $7 billion in net cash on the balance sheet (net of debt outstanding) in your valuation. Exhibit 10 is a good starting point for your analysis.
4. What does the value of comparable companies (Exhibits 12, 13, and 14) indicate about Genentech's value within the range established in question 3?
5. How has the financial crisis affected Genentech's value? What changes in valuation assumptions occurred between June 2008 and January 2009?
6. 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 and should he be prepared to go higher? How much new financing will Roche need to complete the tender offer?
Attachment:- Assignment.rar