Remember back earlier this year, when the temperatures were high, the Dow was at 11,000, and Roche announced that they wanted to buy the rest of Genentech. So how’s that working out?
Not all that well, as far as can be told from the outside. This would take around 45 billion dollars, and 45 billion dollars is a sum that’s increasingly hard to borrow these days. According to Reuters, the prospects for Roche putting together a syndicated loan for that amount are “becoming increasingly remote”. I can believe it. That would surely be the largest deal going at the moment, and given the state of the credit markets, the terms would probably curl your hair if they did manage to float such a beast. And who’s willing to, even if they have that kind of capital sitting around?
For its part, Roche has been telling everyone that they’re still committed to buying Genentech, and that they’re completely confident of getting the financing together. Of course, they’ve been saying that since July, basically word for word, and as the months go on those repeated statements of confidence start to have the opposite effect. So if Roche really is committed and so on, what are they going to have to do?
Reach in and dig out more equity and cash, most likely. What else? Apparently the company is trying to avoid doing that, and they’re willing to leave things hanging until the situation improves. But if you can predict when people are going to be in the mood to lend that kind of money, well, you should be out there making a fortune on the Street with such insights. (I would be!) And if anyone tells you that they have the macroeconomic situation figured out for the next few months, ask them if they went short on oil futures back in the summer. You’d think that anyone with any kind of magic touch would have known enough to do that.
One consequence of all this is that people at Genentech have been living in a cloud of uncertainty for months now, and will stay there for the foreseeable future. That can’t be helping morale or productivity. And if there are any places for people to go, it’s also giving them plenty of time to find them. No, Roche’s timing, in retrospect, looks perfectly awful. When (and if) they finally get around to buying Genentech, what, exactly, will they have bought?
Update: a Genentech VP says that all this has had no impact on morale, actually. You can take that as you wish. . .as for me, I'd find that extraordinary, if it were true.