Illumina’s board of directors has thoroughly reviewed Roche’s unsolicited tender offer with the assistance of its financial and legal advisors and, according to the company, has unanimously determined that the $44.50 per share cash offer is grossly inadequate in multiple respects, dramatically undervalues Illumina and is contrary to the best interests of Illumina’s stockholders.
The board has recommended that stockholders not tender any of their shares to Roche. Illumina filed a Schedule 14D-9 with the Securities and Exchange Commission (SEC) detailing the reasons for its rejection. The letter Illumina sent to Roche appears below.
“It is the board’s unanimous belief that Roche’s offer dramatically undervalues Illumina and fails to reflect the value of the company’s unique leadership position and future growth prospects,” said Jay Flatley, president and CEO of Illumina. “Illumina has established itself as the innovation and market leader in tools for genetic analysis, with a proven track record of profitability and outperformance, resulting in significant value creation…. As the growth of this industry accelerates, Illumina is singularly positioned to expand its market leadership, and to deliver value to our stockholders that is far superior to Roche’s offer.”
The specific reasons Illumina’s board recommends stockholders reject Roche’s offer, which are detailed in its 14D-9 filing, include:
1) The offer is inadequate and undervalues Illumina
The board believes the offer is grossly inadequate and dramatically undervalues Illumina because it does not reflect the underlying value of Illumina’s assets, operations and prospects, including its industry-leading position and growth opportunities:
2) The offer’s timing is blatantly opportunistic
The board believes the timing of the offer is opportunistic and disadvantageous to Illumina’s stockholders because, among other things:
3) The offer fails to capture Illumina’s value as an enabler of personalized healthcare
The board believes the offer fails to recognize Illumina’s central role in enabling a forward-looking vision of personalized medicine and the value Illumina creates for various stakeholders involved in the delivery of healthcare globally. Genetic information and its clinical application are gaining increasing importance, proving central to the pharmaceutical discovery and development process, as well as in the discovery and development of novel biomarkers, companion diagnostics and clinical molecular diagnostics solutions. The board believes Illumina’s technologies, products and services are catalysts and critical to driving the growing use of genetic information across healthcare.
4) Roche’s tactics seek to disadvantage Illumina’s stockholders
The board believes Roche’s urgency in launching the offer reflects its tactic to act upon the short-term dislocation in Illumina’s stock price. The Purchaser, CKH Acquisition (an indirect, but wholly owned subsidiary of Roche), offered $44.50 per share, which is $34.90 below Illumina’s 52-week high of $79.40. Thus, when the closing stock price was $37.69 on Jan. 24, 2012, the board believes Roche acted to take advantage of Illumina’s depressed stock price levels in its attempt to transfer the significant future value of Illumina from its stockholders to Roche and its stockholders.
5) The offer values Illumina at a price below recent trading
The market price of Illumina’s stock has remained above the offer price of $44.50 per share since the public announcement of the offer Jan. 25, 2012. The closing price per share on the Nasdaq Global Select Market on Feb. 6, 2012, was $51.97, 17% greater than the offer price.
6) The offer’s conditions create significant uncertainty and risk
The board believes the numerous conditions set forth in the offer create significant uncertainty and risk as to whether the offer can be completed and the timing for completion. As described in “Item 2. Identity and Background of Filing Person — Tender Offer,” the offer is subject to a litany of conditions.
The board believes the of these numerous conditions is that Illumina’s stockholders cannot be assured that CKH Acquisition will be required to consummate the offer. In addition, the Schedule TO provides that the conditions to the offer are for the sole benefit of Roche, CKH and their affiliates and may be asserted by CKH or Roche in CKH’s sole discretion regardless of the circumstances (including any action or omission by Roche or CKH) giving rise to such conditions.
7) Illumina has received inadequacy opinions from its financial advisors
The board considered the fact that, on Feb. 7, 2012, each of Goldman, Sachs and BofA Merrill Lynch rendered an oral opinion to the board, subsequently confirmed in writing, that, as of the date of such opinion and based upon and subject to the factors and assumptions set forth in its written opinion, the consideration proposed to be paid to the holders of shares (other than CKH and its affiliates) pursuant to the offer was inadequate from a financial point of view to such holders.