Roche "Acquisition Rumors" Impact Share Price

Shares of Swiss company Roche Holdings AG moved down on speculation thatit might be planning a major acquisition with the proceeds of a billion-dollar convertible bond, according to traders.

Talk about an acquisition made sense, they said, because investors want the company to reduce its 15 billion Swiss francs ($10.17 billion) of securities and liquid assets. Investors do not want to pay high price/earnings ratios for a firm that is one third a bank, said one trader, while another noted that Roche has more than enough cash to buy Synthelabo, which is rumored to be a target, without issuing a bond.

Others said that the bond scheme probably reflects the company's desire for cheap liquidity rather than a move to add to its war chest. Genghis Lloyd-Harris of Credit Suisse First Boston called the extra billion "peanuts," and said it was not likely to have any impact on any sizable acquisition; Roche is almost certainly not raising the money to make an acquisition.