Yesterday, Roche Holdings (SWX: ROG.VX; RO.S) of Basel, Switzerland announced that it would initiate a tender offer to acquire 100% ownership of Ventana Medical Systems (NASDAQ: VMSI) of Tucson, Arizona.

Roche is offering $75 for each share of Ventana Medical. This is a 44% premium over Ventana’s closing price of $51.95 on July 22, 2007. It also represents a total cash purchase price of $3 billion for Ventana Medical Systems. For 2006, Ventana Medical Systems had revenue of $238.2 million. Roche’s offer is thus based on a large multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

Roche’s offer is unwelcome at Ventana Medical Systems. Executives at Ventana have been tight-lipped since news of the Roche tender offer became public. Earlier this morning, Ventana Medical issued a press release recommending that its shareholders take no action in response to the Roche offer. In the press release, it further stated that its board of directors would consult with financial and legal advisors on the situation. Within 10 days, it will make a recommendation to shareholders.

In a conference call yesterday, Roche disclosed that it has approached Ventana Medical Systems numerous times since the first of the year to initiate discussions about acquiring Ventana Medical. These approaches were rebuffed by Ventana’s board and executive team. That is why Roche decided to launch a hostile tender offer to acquire all the shares of Ventana.

Lab directors and pathologists should not be surprised if another company enters the bidding for Ventana Medical Systems. It has a robust product line in histopathology, a worldwide presence, and there is great respect for the quality of its products and its corporate culture. Because molecular diagnostics is growing at twice the rate of the traditional in vitro diagnostics market, a company like Ventana Medical Systems becomes a highly-desirable acquisition candidate.

Stay tuned to Dark Daily. Not only will there be ongoing developments in this hostile takeover action, but it is likely that this story will take some surprising twists before it is resolved.
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