Roche says ILMN Deal is Off the Table; ILMN Shares to Drop

In a comment to Swiss newspaper SonntagsZeitung, Roche (OTC:RHBBY) Chairman Franz Humerstated said that a hostile bid for Illumina (NASDAQ:ILMN) is “off the table,” which could send ILMN down by as much as 10% on Monday. When renewed speculation arose that Roche was pursuing ILMN at a higher price (see prior story), shares of ILNM were hovering in the high-$40 to low-$50 range, suggesting that any take-out premium built into the stock will likely unravel with the latest words from Roche.

Investors already know that at 31 times 2013 EPS estimates, ILMN is priced at a premium to its diagnostic peers, and without a potential Roche bid propping up the stock, the shares could come back down to previous levels again. Life Technologies (NASDAQ:LIFE), for instance, trades at just 12 times its 2013 EPS. ILMN has hinted publicly that it would entertain a higher Roche bid, and Roche has already made an offer for the company, which was rejected. At this point, it’s all about price, suggesting that there remains a chance that deal discussions could re-emerge further down the road. Nevertheless, it appears that talks between the two companies have broken down for now, and minus the handy take-out premium, ILMN will again have to trade strictly on its fundamentals.