ROCHE HOLDINGS AG: FUNDING THE GENENTECH ACQUISITION
This case examines the decision by the Swiss pharmaceutical Roche Holding AG (Roche) to offer a record $42 billion bond in February 2009. In light of a pending acquisition of U.S. biotechnology leader, Genentech, Roche management planned to sell $32 billion in bonds at various maturities from 1 year to 30 years and in three different currencies (U.S. dollar, euro, and British pound). In a context of substantial uncertainty in both world financial markets and the value of the Genentech deal, students are introduced to the pricing of corporate bonds by being invited to price Roche's bold global offering.
Please answer the following questions based on the spreadsheets assigned to the case.
1. Is this an easy time to be going to the public bond market with a massive offering?
2. How do we assess the impact of the bond offering on Roche's credit rating and default risk?
3. How do we estimate the risk premium (interest rate points above the government bonds) associated with the estimated default risk?
Attachment:- Roche_Holdings_AG_Funding_the_Genentech_Acquisition.xlsx