Inside the Roche-Genentech takeover

April 10, 2009

From the moment Roche Chairman Franz Humer called Genentech CEO Art Levinson and a small group of board members the evening of last July 20, it was apparent that the South San Francisco-based biotech’s days as an independent company were numbered.
Over the course of the companies’ 18-year relationship, Genentech had blossomed into the world’s biggest biotech, but Roche had never seemed to make up its mind what it wanted from the company. At times it had bulked up its shareholding, and at other times decreased it, usually making a lot of money in the process.
Now, the Swiss drugmaker and majority shareholder’s chairman had no such indecision: He wanted the rest of Genentech. Humer wasn’t interested in talking about anything other than a 100 percent Roche takeover, and he wasn’t taking no for an answer.
“Franz was quite clear from day one,” said Dr. Charles Sanders, the retired Glaxo Inc. chairman and CEO, who was among the four Humer called and would become the front man for Genentech’s negotiations with Roche.
It took eight months for Roche to finally break down Genentech’s defenses and complete the acquisition March 26. It will take many more months to know the deal’s impact on Genentech — its leaders, over 11,000 employees, research operations and much-ballyhooed culture.
What is clear from a review of Securities and Exchange Commision documents and conversations with those involved is that the outcome was largely predetermined from the start. Roche’s majority stake, its persistence in pursuit of the company and turbulence in the world economy all strengthened its position — and weakened Genentech’s. Roche ended up with Genentech for a smaller price than many had predicted.
“I think these two companies could have coexisted into the future without taking this step,” Sanders said, “but that was not my decision.”