It is the third major deal for biotech assets in the last month alone, after Novartis's buyout of research partner Speedel and GlaxoSmithKline's insomnia licensing deal with Actelion.
Roche would gain control of all revenues for big-selling Genentech cancer drugs Avastin and Herceptin, as well as absorbing an attractive portfolio of new medicines.
Roche expects the combination to generate annual pretax cost synergy benefits of about $750-$850 million and to add to earnings per share in the first year after closing.
The company confirmed its full-year forecast and said it was still committed to increasing its dividend pay-out ratio for the next three years.
It will fund from its large cash pile plus debt. Chief Financial Officer Erich Hunziker said Roche was talking to several banks and saw no problems in putting together "attractive" financing for the deal.
UBS analysts estimated Roche may need to raise $15-$20 billion in debt to finance the deal and expected it could do that "fairly easily" without major changes to its debt rating.
Greenhill & Co is Roche's financial adviser on the deal and Davis Polk & Wardwell is legal counsel. Roche did not give further details of how it will fund the buy or how it would achieve the expected synergies.
Weaker Profit Beats Foreast
Big pharmaceutical companies have benefited in recent weeks from safe-haven status as investors flee embattled sectors such as financials, but they still face problems as competition from generic drugs rises and are ever keener to buy into new drugs.
Many pharmaceuticals makers, including Europe's two largest Glaxo and Sanofi-Aventis , face slowing earnings growth due to the loss of exclusivity on key drugs, pricing pressures and more complicated paths to market.
Roche and local sector peer Novartis both trade at almost 14 times forecast 2009 earnings, a premium to competitors Glaxo, Sanofi and AstraZeneca thanks to their promising new drugs.
Roche's first-half sales fell 4 percent to 22.0 billion francs, hit by loss of income from government stockpiling of Tamiflu. Total drug sales fell 6 percent to 17.28 billion francs.
Roche had been expected to post net profit of 5.57 billion francs and sales of 22.04 billion, according to a Reuters poll.
"The numbers are okay, but not outstanding. It's not enough to warrant a premium to the sector," a trader said.