Roche offers $5.7 billion to buy gene firm Illumina

(Reuters) - Roche Holding AG is offering $5.7 billion in cash to buy U.S. gene sequencing company ILLUMINA (ILMN.NQ)Inc in a hostile takeover bid that marks a major play by the Swiss drugmaker into the gene technology field.

Gene sequencing is central to personalized medicine, which allows scientists to predict a patient's response to a particular drug, both during clinical practice and in drug trials.

Roche is already the world's largest maker of cancer drugs, where gene analysis is progressing fastest, as well as a major maker of diagnostic tests.

The Basel-based group said it would offer to acquire all of Illumina's shares for $44.50 each in cash, an 18 percent premium to Illumina's closing price on Tuesday of $37.68 on the Nasdaq.

Roche plans to commence a tender offer because Illumina was not willing to negotiate a transaction, it said.

"Roche has made multiple efforts to engage with Illumina in order to reach a negotiated transaction, but Illumina has been unwilling to participate in substantive discussions," the company said in a statement.

The Swiss company also said it will nominate a slate of independent candidates for election to Illumina's board.

Roche said the deal will be financed from available cash and borrowings under its credit facilities and will not require a financing condition.

"It is our strong preference to enter into a negotiated transaction with Illumina," Severin Schwan, Chief Executive of Roche Group, said in a statement.

However, Illumina urged shareholders take no action pending a recommendation from the board. It will thoroughly review the offer, it said. [ID:nASA03I5X]

SHARES WEAK

Capital Research Global Investors, Baillie Gifford & Co, Sands Capital Management, Morgan Stanley Investment Management and Jennison Associates are the five biggest shareholders of Illumina, who, according to Reuters data based on filings, own about 44 percent of its outstanding shares.

Companies such as Illumina, Affymetrix and Life Technologies get 20-40 percent of their revenue from U.S. government-backed research and may take a hit from any government funding cut.

Shares of Illumina, which receives a significant portion of its revenue from research institutes that depend on government funding, have halved over the past six months after the company warned it expects the uncertainty in research funding to continue through at least the fourth quarter.

In the longer term, however, many analysts believe gene sequencing technology has the potential to revolutionize some areas of medicine, especially as the cost of the technology tumbles.

Earlier this month Ion Torrent, a division of Life Technologies, said it would sell a tabletop machine that is able

to sequence a person's whole genome for just $1,000.

Mapping the complete genome sequence of people with cancer or autism, for instance, may elucidate a disease's underlying genetic causes as well as possible ways to treat it.

Illumina is scheduled to report its fourth-quarter results on January 31.

Roche said it has hired Greenhill & Co and Citigroup as financial advisers. Goldman, Sachs & Co and Bank of America Merrill Lynch are acting for Illumina.

(Additional reporting by Ben Hirschler and Deena Beasley; Editing by Muralikum Anantharaman and Mark Potter)

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