Perhaps Roche can be forgiven for being a bit confused. In the specialized language of business, the rejection Roche just received may actually mean "offer more money."
On Tuesday, the company announced that it was making a second extension of its offer to buy Ventana Medical Systems (Nasdaq: VMSI ) . Roche made its initial unsolicited $75-per-share offer in June, which was rejected by Ventana's management.
That offer was a 45% premium on the stock price at the time. While I'm sure longtime investors are happy that Roche pointed out Ventana's undervaluation to the rest of the world, current investors think Roche's offer is still too low; the stock has traded at well more than $75 since the offer was announced.
Surprisingly, about 13,430 of Ventana's 34 million shares have actually been tendered in the offer. Investors behind those shares need to get themselves over to our broker center. Even if they only own one share, they would likely be better off selling it though a discount broker rather than taking Roche's offer. Who knows, maybe all the tendered shares are owned by Roche employees?
And yet Roche pushes on with its hostile takeover. Today it got an injunction against a 20-year-old Arizona law that would have prohibited it from exercising authority over the company for three years, even after it had a controlling interest. The anti-takeover act restricts the voting rights of an outsider who buys 20% or more of an Arizona company.
To complete a hostile takeover, Roche still needs to win another court case regarding Ventana's "poison pill" bylaws, which would allow that company to dilute the shares bought by Roche by offering additional shares at a discount directly to investors.
This fight seems far from over, and if nothing else, it should make for good entertainment. This round had nice catchphrases -- "wholly inadequate!" and "the price is fair and the premium is good," for example -- but the companies have been on good behavior for the most part. If it goes on much longer, I'm hoping it can put the "hostile" back into "hostile takeover."
Ironically, I think Roche is a perfect partner for Ventana, since Ventana makes a test to determine whether patients will respond well to Roche's breast-cancer treatment, Herceptin. Unlike other drugmakers for which Ventana is designing tests, such as Genentech (NYSE: DNA ) , Roche has an entire division dedicated to diagnostics. It seems to be a match made in heaven; Roche just needs to pony up some more cash.