The case describes the financing of the Genentech acquisition by Roche. The case explores the innovative way of financing by Roche at the beginning of 2009, just months after the Lehman Brothers bankruptcy. With equity markets in free fall, and with debt markets “shut off”, the CFO of Roche manages to finance an acquisition costing more than USD 40 billion, and scores three hits in a matter of weeks: a) the largest private issue of bonds in the US (USD 16.6 billion); b) the largest private issue of bonds in Continental Europe (Euro 11.25 billion); c) the largest private issue of bonds in UK (Sterling1.25 billion). The case presents the facts, the issues at stake, and the incredibly bold and innovative financiang route chosen by the Roche CFO.
The main teaching point of this case is its “anti-crisis” message. At one of the worst possible moments of the 2008 financial crisis, an enlightened CFO (with a small team of talented people) decides that he cannot be affected by the external environment, and decides to go ahead to finance a value creating investment opportunity. The main learnings from this case are: 1) making class participants realize that there are alternative ways to finance good investment opportunities; 2) that although capital structure is important, the creating value mechanism was the project rather than financing; 3) that the financing, however, was the enabler of the value creation potential of the project.
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