The board of Ventana Medical Systems (Tucson, Arizona) last week rejected the hostile $75-a-share offer for the company from diagnostic powerhouse Roche (Basel, Switzerland), terming it "inadequate in multiple respects" and the method used in its offer "high-handed."
After reviewing Roche's unsolicited offer with the assistance of its financial and legal advisors, Ventana said it determined that the takeover bid, valued at about $3 billion, was not in the best interests of its stockholders.
The hostile bid for Ventana was first disclosed at the end of June.
"This is about stockholder value," said Jack Schuler, company chairman. "The directors of Ventana have taken, and will continue to take, their responsibility as fiduciaries to stockholders extremely seriously. Simply put, we believe that Roche is trying to capture value for its stockholders that rightly belongs to Ventana's stockholders."
Christopher Gleeson, president/CEO of Ventana, said that Roche's offer "does not come close to adequately compensating Ventana stockholders for the accelerating momentum of our business, the near-term potential from our innovative platforms, the numerous catalysts that are poised to drive long-term value, our game-changing, next-generation technologies, and the company's growing menu of differentiated, high-value diagnostics that are expected to deliver on the promise of personalized medicine."
Gleeson also called into question Roche's assertions that the earlier efforts at negotiation by Roche were "friendly," saying in a statement that Roche's public disclosures to date are attempts to mislead the market "as to Ventana's board's prior interactions and contacts."
"Although Roche's overtures to our board before June 25th were vague at best, our board carefully analyzed and considered them and any inference otherwise is simply misleading and inaccurate," said Gleeson.
He said that despite Roche's assertions, the Ventana board notified Roche and its advisors "clearly and repeatedly — and well before June 25th — that [it] would be considering their most recent proposal and responding after a special board meeting scheduled for later that week." Instead, he said, Roche chose to initiate its bid for the company without waiting to receive Ventana's Schedule 14D-9 response.
"We can only attribute this to high-handed tactics being used in an effort to deprive our stockholders of fair value. Negotiating at these levels is a non-starter."
Roche recommended that shareholders reject the deal for numerous reasons: failure to reflect Ventana's standalone value; failure to fully reflect Ventana's growth opportunities; offer timing failing to reflect Ventana's stock price; a low control premium and low multiple compared to precedent transactions; and pricing Ventana below recent trading levels.
In a letter to Roche, Ventana said that Roche's interest in the company may be based upon confidential information shared with it for collaborative purposes.
"At a minimum, that indicates a serious breach of our trust. That, together with your high-handed tactics, will no doubt serve as a cautionary tale to those with whom you may seek to do business in the future."
In response to the rebuff, Roche appeared to confirm that company's assertions when it threatened to play hardball and pursue takeover action at Ventana's annual meeting.
Roche said that if Ventana refuses to negotiate it will continue to pursue a transaction unilaterally and "will consider measures in connection with Ventana's 2008 annual meeting."
"Such action may include the nomination of new directors to Ventana's Board and/or proposals to amend Ventana's bylaws," Roche said in its statement.
Roche would have to get the bylaws changed in order to circumnavigate Ventana's "poison pill," or shareholder rights plan, which would make an unsolicited acquisition costly and difficult.
"Roche continues to believe that its offer of $75 per share in cash is a full and fair offer and a unique opportunity for Ventana's stockholders to receive value now that reflects Ventana's current business and full future potential," Roche CEO Franz Humer said in the statement.
"It remains Roche's preference to enter into a negotiated transaction with Ventana," Roche said.
Since Roche made its offer, Ventana's shares have consistently traded at more than $80, well above Roche's offering price.
In other dealmaking news: The Eppendorf Group (Hamburg, Germany) reported that it will acquire the outstanding common stock of New Brunswick Scientific (NBS; Edison, New Jersey) for $11.50 a share. It has also agreed to settle all the outstanding stock options of NBS for cash.
The total value of the transaction, including the settlement of the stock options, is about $110 million.
"The NBS board has unanimously approved this merger and believes that it is in the best interests of shareholders. Furthermore, the board recommends that shareholders approve the merger agreement," said NBS President/CEO James Orcutt, NBS is the developer of equipment and instrumentation for the life sciences, its products used to create, maintain and control physical and biochemical environments for the growth, detection and storage of microorganisms for medical, biological and chemical applications, environmental research and commercial products.
Eppendorf is a global provider of laboratory equipment and associated consumables.
Closing of the transaction is slated for 3Q07, subject to customary conditions, including regulatory approvals and NBS shareholder approval.
At deal close NBS will be an Eppendorf subsidiary, its common stock no longer publicly traded.
Eppendorf said it has received commitments from David Freedman, co-founder and chairman of NBS, other Freedman family members and certain members of the executive management and board of NBS representing nearly 26% of the currently outstanding shares to vote their shares in support of the merger.
Following deal closing, Eppendorf said it expects to operate New Brunswick as a Center of Excellence as part of its international activities. In addition to the existing NBS sales force, Eppendorf will enable NBS to benefit from Eppendorf's global distribution network to accelerate the long-term growth of the combined product range, it said
Deutsche Bank acted as financial advisor to Eppendorf, and Skadden, Arps, Slate, Meagher & Flom acted as legal advisor to Eppendorf. EuroConsult acted as financial advisor to NBS, CBIZ Valuation Group provided a fairness opinion to the board of directors of NBS and Morgan, Lewis & Bockius acted as legal advisor to NBS.