Diagnostics company Illumina Inc. said Thursday that it is adopting a "poison pill" takeover defense in the wake of an unsolicited buyout proposal by Swiss drugmaker Roche.
On Wednesday, Roche Holding AG said it was planning a $5.7 billion tender offer for Illumina, saying an acquisition would strengthen their position in diagnostics because their technologies are complementary.
Illumina makes systems that analyze an individual's DNA, a field that has enormous potential for health care and the medical industry.
Roche's proposed bid of $44.50 per share was an 18 percent premium over Illumina's closing stock price on Tuesday. It sent Illumina's share price soaring above the price Roche cited to $55.15 per share on Wednesday. In midday trading Thursday, the stock gave up some of its gains, falling $1.87, or 3.4 percent, to $53.28.
San Diego-based Illumina has urged stockholders not to take action until it reviewed the proposal and made a recommendation.
Illumina's board adopted the takeover defense "to ensure that our stockholders receive fair treatment and protection in connection with any proposal or offer to acquire the company, including the proposal announced by Roche," Illumina CEO Jay Flatley said Thursday in a statement. He added that it would also give shareholders "adequate time to properly assess any such proposal or offer without undue pressure while also safeguarding their opportunity to realize the long-term value of their investment in the company."
Roche, which specializes in cancer diagnosis and diabetes management, has a history of success with hostile offers. It eventually acquired U.S. cancer drug maker Genentech in 2009 by forcing buyout talks with such an approach.
Roche says it has tried to negotiate a deal with Illumina, but that the company has declined to participate.
Illumina said Thursday that its poison pill allows for one preferred stock purchase right to be distributed as a dividend on each share of its stock held as of Feb. 6. That could drive up the cost of a buyout to prohibitive levels.
Illumina said that Goldman, Sachs & Co. and Bank of America Merrill Lynch are acting as its financial advisers