Genentech: A Company That Got it Right
As you all know by now, Roche, last month, rocked the biotechnology world by tendering an offer to purchase the remaining shares of Genentech that it doesn’t already own. The first offer made by Roche was summarily rejected by Genentech because its board felt that the offer undervalued the company. I have no doubt that Roche and Genentech will eventually agree on a purchase price. That said, when companies are purchased, employees of the purchased company are typically laid-off or re-organized out of jobs. In marked contrast, Genentech announced (as expected) that it would offer virtually all of its 10,700 employees retention bonuses to remain with the company if it is purchased by Roche. These bonuses could cost Genentech as much as $371 million. It was reported that the retention bonuses will be paid whether or not the merger goes through, and are in lieu of 2008 stock option grants.
Even with the bonuses, keeping employees could be a challenge for Genentech. Many Genentech employees (especially those who have been with the company for many years) are expected to become much wealthier if Roche pays a high price for their stock, particularly if unvested stock options vest immediately. That might mean some employees would no longer have to work for a living or might start their own companies to compete with Genentech. Many small biotech startups in the Bay area were started by Genentech alums.
Regardless of the outcome, Genentech’s retention bonus offer is another example of why Genentech was able to seperate itself from the rest of the biotech pack. It is evident that CEO Arthur Levinson (one of the company's founders) understands something that many CEOs don’t—that employees are a company’s greatest asset.
Roche’s eventual acquisition of Genentech will signal the end of an era for one of the biotechnology industry’s most successful pioneers. It will truly be a sad day in the biotech world when the deal is finally consummated.
Until next time…
Good Luck and Good Job Hunting (try Genentech next Fall—there will be a mass exodus)
Levinson gets 8.74M. Ebersman gets 2.73M. Desmond-Hellman gets 4.59M. The numbers are from Bloomberg.
That's great. Good for them. They work hard and deserve it. What about the other 10697 employees? Are they taken cared of as well as the company's officers? Take your best guest.