Genentech & Roche Merger Coming Under More Fire (DNA)

Genentech Inc. (NYSE: DNA) is running into some issues over the merger with Roche at $89.00 per share.  Wall Street DOES expect this merger to close with Genentech becoming a subsidiary again rather than a "majority owned" company by Roche.  But it is expected that Genentech will have to fetch over $100.00 per share.

Today the firm is being sued by a law firm over this as being a breach of fiduciary duty and as an offer that is inadequate and that Genentech is worth more than $100.00 per share.   We received a direct email copy of the complaint press release titled "COHEN MILSTEIN HAUSFELD & TOLL P.L.L.C. FILES LAWSUIT CONCERNING GENENTECH BUYOUT" which you can see below.

Another issue over this is that Roche has taken a corporate debt downgrade and may have more.  S&P trimmed its corporate debt rating a notch and both Moody’s and Fitch have each notified that this may warrant downgrades after a review.

Jon C. Ogg

Below is a full copy of the release from the email we received:

NEW YORK, July 23, 2008 — Cohen, Milstein, Hausfeld & Toll,P.L.L.C. has today filed a lawsuit in the Court of Chancery of theState of Delaware on behalf of Genentech Inc. ("Genentech" or the"Company") (NYSE:DNA) shareholders concerning the proposed buy-out (the"Proposed Buy-Out") of Genentech by its majority shareholder, RocheHoldings AG ("Roche"). The complaint alleges violations of breach offiduciary duty, and aiding and abetting breaches of fiduciary duty withrespect to Roche’s Proposed Buy-Out.

On July 21, 2008, Roche announced in a press release that it hadoffered to purchase the remaining shares of Genentech that it did notalready own for $89 per share, for a total price of $43 billion. Rocheis Genentech’s majority shareholder, owning more than 50% of theCompany.

The complaint alleges that the Proposal is unfair and inadequate andtimed to take advantage of general market turmoil as well as a weakU.S. dollar, and is directed at enabling Roche to assume even greatercontrol of Genentech’s businesses. In reaction to the Proposed Buy-Out,analysts have stated publicly that the price offered by Roche isinadequate and they expect that the Company is worth in excess of $100per share. The complaint further asserts that based upon the controlstructure that Roche holds over Genentech, Genentech’s Board ofDirectors will be unable to independently and adequately negotiate orconsider a fair deal. Upon completion of the Proposed Buy-Out,Genentech will no longer be publicly traded.

Steven J. Toll, Cohen Milstein managing partner, stated, "It is clearthat the Proposed Buy-Out is on unfair terms and shortchangesGenentech’s shareholders." Partner Lynda J. Grant said, "This is thesecond time Roche has attempted to purchase Genentech. Roche has ahistory of exploiting Genentech with repeated purchases and sales ofthe Company for its own gain."

Cohen, Milstein, Hausfeld & Toll, P.L.L.C has significantexperience in prosecuting investor class actions involving securitiesfraud. The firm has offices in Washington, D.C., New York,Philadelphia, Chicago, San Francisco, and London and is active in majorlitigation pending in federal and state courts throughout the nation.

The firm’s reputation for excellence has been recognized on repeatedoccasions by courts which have appointed the firm to lead positions incomplex multi-district or consolidated litigation. Cohen, Milstein,Hausfeld & Toll, P.L.L.C. has taken a lead role in numerousimportant cases on behalf of defrauded investors, and has beenresponsible for a number of outstanding recoveries which, in theaggregate, total in the billions of dollars.

Mr. Toll and Ms. Grant are available for comment. A copy of the filed Complaint is available on the firm’s websitewww.cmht.com