Roche and Genentech reach amicable agreement after eight months of wrangling

Swiss drugs company Roche has agreed to merge with Genentech and is to buy the remaining shares of the US firm for US$47bn (Euro 37bn).

Roche already owned 55% of Genentech and the deal has ended eight months of wrangling between the two firms.

Dr Charles Sanders, chairman of Genentech's special committee, said: "We believe this is a fair offer for Genentech shareholders, and the committee is pleased to come to a successful conclusion of this process. We look forward to working with Roche to complete the transaction as expeditiously as possible."

Franz Humer, chairman of the Roche Group, said the agreed transaction "offers clear and important advantages for the shareholders of both companies".

Roche offered US$89 a share in July 2008, but Genentech's special committee argued that this substantially undervalued the company, adding that it would only consider an offer that recognised the value of the company and reflected the significant benefits that Roche would gain as a result of full ownership. The new offer is for US$95 a share.

The combined company will generate approximately US$17bn in annual revenues and will be the seventh-largest drugs company in the US. It will have around 17,500 employees in the US pharmaceuticals business alone, including a combined sales force of approximately 3,000 people.

Research and early development will operate as an independent centre within Roche from its existing campus in San Francisco.

Roche's pharma commercial operations in the US will be moved from Nutley, New Jersey to Genentech's site in San Francisco and will operate under the Genentech name. The existing US sales organisations of both companies will be maintained, resulting in a strong presence in several specialist areas.

Roche said in a statement that the transaction would "provide the opportunity to simplify the structure of the combined organisation and maximise the benefits of enhanced scale".

The company has already begun to wind down its operations at Palo Alto and will relocate the site's virology r&d activities to San Francisco. The inflammation group at Palo Alto is in the process of becoming part of Roche's Nutley r&d organisation.

Genentech's late stage development and manufacturing operations will be combined with the global operations of Roche.

Roche's manufacturing operations in Nutley will be closed and support functions, such as informatics and finance, will be consolidated with those of Genentech.