For Illumina, Roche's Third Offer Not So Charming

Includes: ILMN, RHHBY
by: Matt Schilling

Roche (OTCQX:RHHBY) has once again raised its offer for Illumina (NASDAQ:ILMN), this time it's almost $6.7 billion or roughly $51/share. Both Franz Humer, Roche's Chairman and Severin Schwan, Roche's CEO took less time increasing their bid this time compared to the previous two. Investors should take note of the aggressive hostility of both Humer and Schwan in their latest letter.

"If you continue to decline to negotiate with us, we will have no choice but to continue our effort to effect a transaction unilaterally," Humer said in a letter to Illumina. "However, I strongly hope that you will either agree to commence discussions with us now or remove all obstacles so that your shareholders can make their own determinations about the adequacy of our increased offer."

How should investors play this news? They should get in while the iron is hot. The hostile bids have run the price of the stock up considerably. The latest offer is for $51/share, however shares are currently trading 2%-3% above that offer in early Thursday trading.

ILMN is a very attractive company; they have great fundamentals and an even greater pipeline. They've beat analysts' estimates three out of the last four quarters and have solid growth forecasts moving forward. Their primary line of solutions includes HiSeq 1000 and HiSeq 2000, both of which are genetic sequencing analysis tools using sequencing-by-synthesis technology.

I carry the consensus opinion that ILMN is worth much more than $51/share, and with that being said $57-$59/share would be a reasonable offer to shareholders by Roche.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.