Using the Mid Text Function/Moving and Copying Spreadsheets /Flow Charts Using Text Boxes and Auto Shapes

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Questions for the Roche case Case write-ups due on Wednesday, March 30, at 8:10 pm 1. Why is Roche seeking to acquire the 44% of Genentech it does not own? From Roche’s point of view, what are the advantages of owning 100% of Genentech? What are the risks? (1 pt) Roche already had 56% of shares of Genentech and now it seeks to acquire rest of the 44% shares so as to get the benefits of synergies. The pharmaceutical companies have been unable to introduce new products lately, and their only way to remain profitable is by mergers and acquisitions. Roche also used this method. Acquisition will help the firm compete in the market and thus will help it grow. Advantages of owning 100% of Genentech’s shares: * 1 The merger will…show more content…
| | | | | | Enterprise value | 72676 | | | | Commercial paper | -500 | | | | Long term debt | -2329 | | | | Cash and securitization | 9000 | | | | Equity value | 78847 | | | | Shares outstanding | 1052 | | | | Value per share | 74.9 | | | | Following table shows the possible values of value per share as affected by different annual and long term growth rates. | | | | | | | Annual/long term growth rates | 1% | 1.55 | 2% | 2.50% | 3% | 5% | 61 | 63 | 66 | 69 | 72 | 6% | 65 | 67 | 70 | 73 | 77 | 7% | 69 | 72 | 75 | 78 | 82 | 8% | 73 | 76 | 79 | 83 | 87 | | | | | | | Range of values per share is from $67 to $83 per share. This is in range of Greenhill's own calculations. | WACC also has impact on the above range of values. Changing the WACC from 9% to even 8% or 10%, will change the range to $65 to $87. Fundamentals behind WACC: Market risk premium | 7.10% | Beta (as of July 2008) | 0.26 | Beta of equity | 0.3066 | Treasury yield (as of July 2008, 10 years) | 4.01% | Cost of capital | 6.18% | Commercial debt | 500 | 2.08% | | Long term debt (AAA) | 2329 | 5.67% | | Total debt |

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