RLPC-Roche remains in talks with banks about Genentech
By Zaida Espana
LONDON, Oct 2 (Reuters) - Swiss drugmaker Roche (ROG.VX) remains in discussions with a group of ten to fifteen core relationship banks regarding a loan for a potential new bid for US biotechnology group Genentech DNA.N, bankers close to the deal said on Thursday.
"I would classify them as slow talks, meaning that there's not a lot of activity (on the financing side) as it depends on the M&A process. Everyone is waiting for the M&A strategy, I would think that by now the company knows what price lending comes at," one banker told Reuters Loan Pricing Corp (RLPC).
Genentech, which is already 55 percent owned by Roche Holding, rejected a $89 per share bid from Roche in mid-August, but speculation about a deal was reignited after Genentech's shares slid below Roche's offer price at the end of September.
Genentec shares were quoted at $86.55 at 1919 GMT.
A group of banks, led by co-ordinators Citibank and Deutsche Bank, have been discussing the structure of the potential deal for more than a month after Roche asked for feedback, bankers said.
"At the moment, the story is with the acquisition strategy, it has to move along before anything else can happen (with the financing)," another banker said.
Although equity prices have slumped, making bid targets more attractive, would-be buyers are facing increased interest margins on loans as banks attempt to pass on soaring funding costs.
Pressures are most acute in dollar funding, which would be the borrowing currency for the U.S. acquisition. The cost of three-month dollar funding in the interbank market soared to 4.2075 percent, up slightly from 4.15 percent on Wednesday.
Equity analysts at JP Morgan wrote in a research note on Thursday that Roche would be looking for a combination of bridge financing and dollar-denominated bond issuance with a mix of maturities.
"On an indicative basis, they (Roche) will want to see how much they can get done in the bank market and then use other instruments or add instruments upfront or alongside to reduce the amount of the loan," the first banker said.
Roche said on Monday it remained committed to its takeover proposal and its position had not changed since CEO Severin Schwan said two weeks ago he was confident of securing financing.
"(Roche) are planning accordingly in terms of the transfer of resources away from the Roche sites in the US (Palo Alto and Nutley), with Genentech becoming the sole brand in the US", analysts at JP Morgan wrote in a note.
(Reporting by Zaida Espana; additional reporting by Alasdair Reilly; editing by Elaine Hardcastle)
