Swiss drugmaker Roche Holding AG offered about $5.7 billion in cash to buy U.S. gene sequencing device maker Illumina Inc , in a potentially hostile takeover bid to boost its position in life sciences and diagnostics.
Biotechnology and pharmaceutical companies can utilize gene-sequencing on a larger scale to predict a patient's response to a particular drug, especially during drug trials.
Roche, the world's largest maker of cancer drugs, 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 would 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]
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 that it expects the uncertainty in research funding to continue through at least the fourth quarter.
Illumina is scheduled to report its fourth-quarter results on January 31.
Roche said it has hired Greenhill & Co and Citigroup as financial advisers.
(Additional reporting by Deena Beasley; Editing by Muralikumar Anantharaman)