M&A CLASS
Peter Goodson
M&A Class
Welcome back from Spring Break!
Speaker Tuesday- On Tuesday night we have a guest speaker from the Financial Sponsors Group at Morgan Stanley. We will be looking at lending to finance acquisitions. He will cover the topic from the lenders perspective, the process that takes place and the key dimensions that lenders measure. Additionally our guest will speak to the current PE market- the challenges faced in a precarious environment as well as outline the rapidly changing structure of private equity firms.
For those in the FTMBA program let Phil know as soon as possible to save a seat if you want to attend. Its first come first served on the seats. Remember huge applause when we introduce and finish… our only pay off for his giving us the time.
We will also jump back to the myths and realities of Integration from last session and anchor some concepts that are important for the strategic buyer in particular.
Ducati Case due April 13th- The hard part of this assignment is the qualitative thinking in part 2 – the “Bonderfellow” slides. I suggest you read the case and the tutorial before class this week. We will be discussing the slides in class and the model early week thereafter.
Ducati Webinar Week of April 9th- Phil and Serge will be organizing a webinar for both classes on the Ducati model. We will give you a time in class. This is not a modeling course but we expect you to handle the thinking and key points of a financing model as graduating MBA students. It is a rich formula that any graduate should have mastered. In this case we make it simple so non finance majors can nail down the key concepts for their future careers.
Roche Raises Bid to Acquire Illumina to $6.6B Questions for class…
1. What is the price strategy Roche and Bob Greenhill is applying?
2. Will Illuminia hunt for white nights now?
3. How will this play out?
March 29, 2012
NEW YORK (GenomeWeb News) – Roche said today that is has raised its cash tender offer for Illumina from $44.50 to $51 per share — an increase of 15 percent — valuing the deal at nearly $6.6 billion.
According to Roche, the new offer represents an 88 percent premium over Illumina's closing stock price on Dec. 21, 2011, the day before the firm's stock price climbed in response to rumors about a takeover by Roche, and a 34.1x multiple of Illumina's projected forward earnings, based on analysts' current consensus estimates for 2012.
Following Roche's initial offer on Jan. 25, Illumina's stock has traded mostly between $50 and $55 per share and closed at $49.88 yesterday.
"Based on our discussions with Illumina shareholders we have seen interest to accelerate the takeover process," said Roche CEO Severin Schwan in a statement, prompting the company to raise its offer. He reiterated that Roche continues to prefer to negotiate a takeover with Illumina's management. "We look forward to the possibility of a swift completion that offers immediate value to Illumina's shareholders," Schwan said.
Roche's new bid comes just a few days after the firm extended its initial $44.50-per-share bid to April 20. It noted at the time that only 144,208 shares of Illumina's stock had been tendered as of March 23.
In a letter to Illumina CEO Jay Flatley today, Roche Chairman Franz Humer said that Roche has had "a number of productive discussions" with Illumina shareholders over the last few weeks and is aware of Illumina's statements that the initial offer of $44.50 was "insufficient to provide a basis for discussions between our companies."
In his letter, made public by Roche, Humer urged Flatley to enter into negotiations with Roche. "We hope that you will agree that our new price presents a very attractive opportunity to your shareholders and that the interests of your shareholders and fiduciary responsibilities of you and your Board require that you agree to enter into discussions with us," he wrote.
"If you continue to decline to negotiate with us, we will have no choice but to continue our effort to effect a transaction unilaterally," he said. "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 your increased offer."
In response to the increased offer price, Illumina advised its shareholders to "take no action at this time."
Illumina said that its board of directors, in consultation with its financial and legal advisors, will "thoroughly review" Roche's revised proposal and then make a recommendation to stockholders. Illumina's board rejected Roche's initial offer as "grossly inadequate."
All other terms and conditions of Roche's tender offer for Illumina remain the same as before.
Mizuho Securities analyst Peter Lawson said that in a note published this morning that he didn't expect Roche to up its bid this soon, and he anticipates the Illumina board will reject the new offer as well. "We still anticipate a higher bid, potentially mid-year, to take advantage of anticipated weakness in the space surrounding 2013 NIH/U.S funding," he wrote.
"We view the raising of the bid as a sign that underscores Roche's commitment to successfully acquiring [Illumina]," Robert W. Baird analyst Quintin Lai said in a note.
Oppenheimer's David Ferreiro added that he expects the deal to eventually be completed and said he isn't surprised by a lack of other bidders. He said that other potential suitors, such as Siemens or Abbott, "are likely not willing to try and convert a tools business into a diagnostic one."
In early Thursday trade on the Nasdaq, shares of Illumina were up 4 percent at $52.01.
Yahoo’s Board Reconstruction- Our “friends” at Yahoo are in the news again. Questions for class…
1. On the surface what expertise and value added does each of the new proposed directors bring to the Yahoo board?
2. What experience would you prefer to see on N this board and why?
http://techcrunch.com/2012/03/25/yahoo-three-new-board-members/