Roche Holding Ag: Funding the Genentech Acquisition
16 Pages Posted: 30 May 2017 Last revised: 27 Nov 2018
This case examines the decision by the Swiss pharmaceutical Roche Holding AG (Roche) to offer a record $42 billion bond in February 2009. In light of a pending acquisition of US biotechnology leader Genentech, Roche management planned to sell $32 billion in bonds at various maturities from 1 year to 30 years and in three different currencies (US dollar, euro, and British pound). In a context of substantial uncertainty in both world financial markets and the value of the Genentech deal, students are introduced to the pricing of corporate bonds by being invited to price Roche's bold global offering.
Rev. Nov. 8, 2018
Roche Holding AG: Funding the Genentech Acquisition
We are confident that we will have the financing available when the money is needed…The plan is to use as financing partly our own funds and then obviously bonds and then commercial paper and traditional bank financing. We will start by going to the bond market first.
—Roche Chairman Franz Hume
In July 2008, Swiss pharmaceutical company Roche Holding AG (Roche) made an offer to acquire all remaining outstanding shares of US biotechnology leader Genentech for (US dollars) USD89.00 per share in cash. Six months later, with equity markets down 35%, Roche announced its recommitment to the deal with a discounted offer of USD86.50 in cash per share of Genentech stock.
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Keywords: cost of debt, risk premium, bond math, credit ratings, default risk
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