Swiss drug company Roche is trying to steal the part of biotech company Genentech (DNA) that it does not already own. Roche has offered to buy the 45% of DNA that belongs to public shareholders for $89 a share. That is less than a 10% premium above where the company traded at the end of last week.

The total value of the buy-out would be $43.7 billion.

According to The Wall Street Journal, "The precise terms of the deal, as well as the conditions to its consummation, will be determined through negotiations with the independent directors." Current investors in Genentech should hope that the aforementioned directors are not a bunch of suckers.

Genentech is just coming back into its own, as its last quarterly report shows. At $82, the stock trades near its 52-week high. But, shares were beaten up late last year on poor results. Less than two years ago, DNA changed hands at almost $90.

Citigroup recently started Genentech as a "buy". The Citi analyst reasoned that the company had improving value because, among other things, it expected a 17% compounded annual growth for Avastin sales in the 2008 to 2012 period, driven by growth in colon, lung and breast cancer. As it released its quarterly numbers a few days ago, Genentech also raised its 2008 outlook to a range of $3.40 to $3.50 per share, from $3.35 to $3.40.

Genentech has a very reasonable chance to keep topping Wall St. expectations again. Sales of its leading drug, Rituxan, were up 12% last quarter. The company has also clamped down on expense growth, further improving operating margins.

Genentech is worth at least $100, which is where it traded in late 2005 when its prospects were last extremely bright.

Anything under that price is just robbing shareholders blind.

Douglas A. McIntyre

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