In a recent turn of events relating to the never-ending dispute
), Institutional Shareholder Services (
) and proxy advisor firm, Egan-Jones Ratings Company
supported Illumina's rejection of Roche's second takeover bid.
The tussle between the two dates back to January 23, 2012, when
Roche offered $44.50 per share (aggregate value $5.7 billion) in
cash to acquire Illumina. This offer was at a premium to the then
prevailing share price ($37.69) of Illumina. Earlier, Roche had
made multiple efforts to strike a deal with Illumina, but Illumina
was never eager to participate in any substantial discussions.
Again in April 2012, following Illumina's dismissal of its
initial bid, Roche placed an increased offer of $51.00 to takeover
Illumina. The second offer bid was also rejected by Illumina as it
viewed the offer price to be undervalued. Concurrently, ISS and
Egan-Jones also found the offer to be grossly insufficient
considering Illumina's future valuation.
Both ISS and Egan Jones suggested their clients to vote against
the Roche proposal and support the re-election of Illumina's
director nominees at Illumina's 2012 Annual Meeting of Stockholders
on April 18, 2012. However, Roche is very much disappointed with
the views of these firms.
Illumina remains encouraged with the support of these two
advisory firms. Earlier, in its letter to the shareholders, the
company drew attention to its leading position in the global
next-generation sequencing market (with 60% market share). The
company estimates that over 90% of all sequencing output across the
world is produced on Illumina instruments.
In addition to that, the company also noted its steady
performance over the past decade where it had consistently
outperformed analyst estimates of revenues and EPS. While revenues
increased at a 10-year CAGR of 83%, non-GAAP EPS increased at a
5-year CAGR of 26%. Moreover, Illumina generated a 1,129% return to
its stockholders compared to a mere 16% gain in the S&P 500
during the 10-year period.
Amidst the deadlock, we suspect the failure of the Roche
takeover bid to be imminent. The revised offer price continues to
remain lower than the traded price, which reflects the investors'
high aspiration about the company's future prospects. Presently,
Illumina retains a short-term Zacks #2 Rank (Buy rating). Over the
longer term, we have a 'Neutral' recommendation on the stock.
ILLUMINA INC (
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