ZURICH Roche Holding AG ROG.VX has overcome Ventana Medical System Inc's VMSI.O resistance to its takeover bid by raising the price, acquiring the diagnostics maker for $3.4 billion to boost its cancer testing business.
Roche said on Tuesday it would increase the tender offer for all outstanding Ventana shares to $89.50 per share in cash from $75 per share.
Analysts said the deal looked expensive and was at a significant premium to recent deals, but was a good strategic fit. Roche stock fell 2.7 percent to 188.60 Swiss francs by 1035 GMT, in a weaker Swiss blue chip market .SSMI.
"The net effect of the increased offer price on the Roche per share price is less than 1 franc and as such should only have a small negative impact," Vontobel analyst Karl-Heinz Koch said.
"We believe the acquisition makes strategic sense as there are potentially large synergies with cancer therapeutics in the future," he added.
The deal would have minimal impact on Roche's margins and earnings per share, its diagnostics head Severin Schwan said.
Ventana had repeatedly rebuffed Roche's original bid, calling it grossly inadequate, but agreed to open its books to the Swiss company in November and has now recommended the higher offer.
Roche's amended offer will expire on February 7 and Roche said Ventana Chief Executive Christopher Gleeson will remain as CEO of the business after the deal.
The increased price means Roche is paying 9 times Ventana sales and 26 times earnings before interest, tax, depreciation and amortization (EBITDA), said DZ Bank analyst Peter Spengler.
The $75 offer already valued Ventana at a higher multiple than other recent similar deals, including Inverness Medical Innovations Inc's IMA.A purchase of Biosite Inc and Qiagen NV's QGEN.DE acquisition of Digene Corp.
The Biosite deal was for 4.6 times expected 2008 sales , according to data from analyst Bruce Cranna at Leerink Swann, and Digene for 6.5 times.
Switzerland-based Roche sees Ventana as a particularly good fit, as the Tucson, Arizona-based firm makes tests which could speed up detection of cancer and enhance use of targeted therapies, such as Roche's blockbuster drug Herceptin.
"The deal is in line with Roche's diagnostics strategy and will boost its oncology diagnostics presence substantially. We therefore think the deal makes sense," Denise Anderson, analyst at Landsbanki Kepler, said in a note.
Ventana shares rocketed after Roche made its initial cash offer in June 2007, pitched at a 44 percent premium to what investors had previously thought the company was worth.
Ventana shares have remained above $75 since and closed at $85.33 on Friday, when U.S. markets were last open.
The higher bid is unlikely to cause ripples at cash-rich Roche, which had 23.3 billion Swiss francs ($21.01 billion) in cash at the end of June 2007.
(Additional reporting by Sam Cage in Davos, Switzerland; Editing by Louise Ireland)