Roche / Illumina: time to talk Severin Schwan is a determined man. The chief executive of Roche Holding will simply not give up on Illumina. Thursday's revised terms raised the Swiss pharmaceuticals group's cash offer for its US target by 15 per cent, valuing the genetics company at $6.7bn. But Illumina chief executive Jay Flatley is also playing a blinder: his studied disdain for Roche's offer, in the near certainty that it would have to table a better one, is working a treat. This takeover is now reaching the stage where Roche gets close to overpaying and Illumina gets close to having to recommend before its suitor walks. The Swiss group is still well within its means: free cash flow was nearly SFr14bn in 2011; Goldman Sachs estimates that the company will generate SFr37bn of free cash flow net of dividends and capital expenditure in the next five years. It has little debt, and deep pockets. And Illumina is a good fit: although it would add only 2 per cent to Roche's revenues, its gene sequencing technology could help to develop new cancer drugs. The riskier balancing act is Mr Flatley's. Roche's revised offer represents an 88 per cent premium to Illumina's share price before speculation about the Roche deal leaked into the market in late November - and yet it is still a third below the equally bid-inflated level at which the shares were trading last July. Roche's offer puts Illumina on a forward earnings multiple of 34 times, compared to 12 to 14 times for such peers as Life Technologies and Agilent. At least some of Illumina's shareholders are clearly backing Roche. If Mr Flatley and the board prove too intractable, Illumina's value has a long way to fall. Illumina says its shareholders should take no action on the revised Roche offer. But the US company's board should give the terms a thorough hearing. The time for talking is approaching.