On Thursday, an agreement on the prospective deal we have been discussing for months finally was reached: Roche formally agreed to acquire Genentech for $95 per share at a total price of $46.8 billion.

Who came out the big winner here?  Well, while Roche ended up with the Genentech pipeline prize, it has been suggested that the real winners are the Genentech employees and of course all of the Genentech investors.

The San Francisco Business Journal reported on the deal as follows:

On paper, Roche appears to have won. The final price of $95 per share is only $6 above the July bid. That’s significantly below the $100-plus estimates of many analysts. . . . The final price also is significantly below the $112 to $115 pegged by a Genentech analysis last fall.

However, the deal on paper really doesn’t take into account the significance of the retention program put in place last fall to keep employees from leaving.

The San Francisco Business Journal reported:

According to the retention bonus plan, if the merger occurs by the end of June and 100 percent of outstanding vested stock options accelerate as part of the merger — which is provided under the merger agreement — employees will receive 50 percent of the retention bonus when the merger is completed and 50 percent one year after the merger is completed.

If an employee is “involuntarily terminated” without cause or resigns for “good reason,” the retention bonus is paid out soon after the employee leaves.

Plus, Genentech employees could pocket millions of dollars more from the sale of their stock holdings to Roche.

What does this mean for most employees?  That this deal will provide a nice windfall for them in an otherwise bleak economy.

For Roche, on the other hand, the real battle now is going to be to find a way to retain Genentech’s best and brightest.  Roche may find that to be a much tougher challenge than negotiating to acquire Genentech.

SF Gate reported on this issue as follows:

Among the minority Genentech investors who will receive billions cashing in their stock under the agreement announced late Thursday are the biotech company’s executives and employees. Their windfall, industry experts say, might liberate many of them to launch their own dream companies rather than stick around.

Veterans of Genentech, a quintessential California trailblazer, might chafe at the more formal culture of a pharmaceutical conglomerate based in Basel, Switzerland, insiders say.. . .  .Members of the tight-knit Bay Area biotech community say Genentech staffers have been circulating their resumes, and suitors such as venture firms have been talking them up about possible new enterprises.

So, all in all, while Roche may have come out the winner on this deal in terms of the price per share and winning the Genentech pipeline, there is a good argument that the real winner is not the acquiring company but the Genentech employees and investors.  We will all have to watch over the long-term to see how Roche fairs down the road, and to see whether this deal really pays off for Roche in the future.