(1) Valuation of Genentech-Roche Merger
(Group: Funfurt Faus Formulars)
Scenario Setting
You are an advisor for Roche in 2008. Roche already owns a majority stake in Genentech Inc., but it now seeks to
gain full control over the company. Based on your expertise, Roche has asked you to assist in evaluating the
financial rationale and potential synergies of this acquisition.
Presentation Assignment
Prepare a 15-20 minute presentation to be delivered in class on November 28, 2025. Your presentation should be
designed such that you can present your answer/pitch your idea to your fellow students. Be clear and concise. Be
prepared to answer questions from your classmates and instructor.
Questions/topics to be addressed in your presentation
1. Roche's Motives for a Merger
Explain Roche’s key strategic and financial motives for pursuing a full merger with Genentech. You may
consider both short-term and long-term.
2. Why merge now (and not before)?
Why does Roche want to proceed with this merger at this particular point in time? Consider market conditions,
internal strategic drivers, and industry trends. Explain your reasoning by linking it to Roche’s financial and
strategic objectives.
3. Valuing the Synergies: Present Value Calculation
As Roche’s advisor, you are tasked with estimating the value of synergies expected from the merger. Use
information from the case and apply a discounted cash flow method to compute the present value of these
synergies. Use a discount rate of 9%. Make sure to outline your assumptions clearly and provide step-by-step
calculations.
(2) Minority Shareholder Evaluation of Roche’s Offer’
(Group: High 5)
Scenario Setting
You are a minority shareholder in Genentech, and Roche has presented an offer to acquire the remaining shares
of the company. Your task is to evaluate whether the offer is fair from the perspective of a minority shareholder
and perform a financial analysis using a discounted flow methodology.
Presentation Assignment
Prepare a 15-20 minute presentation to be delivered in class on November 28, 2025. Your presentation should be
designed such that you can present your answer/pitch your idea to your fellow students. Be clear and concise. Be
prepared to answer questions from your classmates and instructor.
Questions/topics to be addressed in your presentation
1. Roche's Duties to Other Shareholders
Explain Roche’s fiduciary duties to Genentech’s minority shareholders. Address Roche's obligations to act in the
best interests of all shareholders. What constitutes a fair offer in the context of a merger? How can minority
shareholders ensure they are being treated fairly?
2. Determining the Discount Rate: No Debt Financing
To evaluate the synergies you need to determine an appropriate discount rate. Use the CAPM formula and
provide an estimate for a discount rate. Assume no debt financing for this scenario. Suppose the market risk
premium is 7.1%. Provide a clear explanation of your assumptions and calculations.
3. Adjusting for Debt Financing: 50% Equity, 50% Debt
Now assume Roche uses a capital structure of 50% equity and 50% debt for the acquisition. Recalculate the
discount rate using a (leveraged) CAPM. Assume that the corporate tax rate is 0% and the debt beta is 0.2.
Explain how this change in capital structure impacts the overall risk and cost of capital, and how it alters the
present value of synergies.
(3) Competitor Analysis of Roche's Bid for Genentech’
(Group: Empty Minded)
Scenario Setting
You are a competitor to Roche, and the offer to acquire Genentech has piqued your interest. You are now
considering the possibility of making a competing bid to purchase Genentech. To inform your decision, you will
evaluate Roche’s financial capacity to complete the acquisition and independently value Genentech as a stand-
alone company.
Presentation Assignment
Prepare a 15-20 minute presentation to be delivered in class on November 28, 2025. Your presentation should be
designed such that you can present your answer/pitch your idea to your fellow students. Be clear and concise. Be
prepared to answer questions from your classmates and instructor
Questions/topics to be addressed in your presentation
1. Examining Roche’s Financial Capacity
Examine Roche’s balance sheet to assess whether Roche has sufficient financial resources to fund the acquisition
of Genentech. Do you believe Roche can comfortably finance the acquisition?
2. Valuing Genentech as a Stand-Alone Company
Estimate the intrinsic value of Genentech as a stand-alone entity. To do this, use a Discounted Cash Flow (DCF)
method and a discount rate of 9%. How large is the value? Present your valuation assumptions and calculations
clearly, and explain your rationale for any estimates you make.
(4) Bond Issuance to Finance Genentech Acquisition
(Group: Main Unity)
Scenario Setting
It is February 2009, and you are working in Roche’s treasury department. To finance the acquisition of
Genentech, Roche is considering issuing bonds. Your task is to analyze the changes in interest rates between July
2008 and February 2009, assess the impact on bond pricing, and estimate an appropriate coupon rate for the
bond issuance.
Presentation Assignment
Prepare a 15-20 minute presentation to be delivered in class on November 28, 2025. Your presentation should be
designed such that you can present your answer/pitch your idea to your fellow students. Be clear and concise. Be
prepared to answer questions from your classmates and instructor.
Questions/topics to be addressed in your presentation
1. Interest Rate Changes: July 2008 vs. February 2009
Research and describe how financial markets have changes between July 2008 and February 2009. Explain in
particular how interest rates have evolved.
2. Impact on Bond Pricing: July 2008 vs. February 2009
Evaluate how the change in interest rates from July 2008 to February 2009 may affect the pricing of the bonds
Roche plans to issue.
3. Provide an estimate for a Coupon Rate for the Bond
Based on your analysis of the interest rate environment and information from the case, provide an estimate for an
appropriate coupon rate for Roche’s bond issuance in February 2009.
(5) Evaluating Roche’s Bond Issuance as an Investor
(Group: The Vocals)
Scenario Setting
It is February 2009, and you are a potential investor considering Roche’s upcoming bond issuance to finance its
acquisition of Genentech. Your task is to analyze how the bond issuance may impact Roche's credit rating, assess
future interest rates using the yield curve, and discuss your preferences for bond maturities.
Presentation Assignment
Prepare a 15-20 minute presentation to be delivered in class on November 22. Your presentation should be
designed such that you can present your answer/pitch your idea to your fellow students. Be clear and concise. Be
prepared to answer questions from your classmates and instructor.
Questions/topics to be addressed in your presentation
1. Impact of Bond Issuance on Roche’s Credit Rating
Evaluate whether the issuance of bonds will affect Roche’s credit rating. May additional debt influence Roche's
creditworthiness. Why/why not.
2. Future Risk-Free Interest Rate
Provide an estimate for future risk-free interest rates. Is it be worthwhile to delay the issuance of bonds?
3. Preference for Bond Maturities
Do you have preference for certain maturities of Roche’s bonds?
