At a time when many dealmakers want to prove their ability to fund an acquisition, Swiss drugmaker Roche Holding AG is staying mum on how it would pay for its bid to buy the rest of Genentech.

“At this point we would not give any details or further information on how we arrange the financing and where exactly we stand in the negotiating process,” Roche Chief Executive Severin Schwan told reporters.  “I would like to reaffirm that we remain committed to the deal and we aim for a negotiated settlement.”

Earlier this month, Roche was in talks with a group of 10 to 15 banks regarding funding, but talks were characterized as “slow” by bankers close to the deal.

When Roche first made its $89 per share offer in July to buy the 44-percent of Genentech it does not already own, it cited the weak dollar as an attractive incentive. Since then, the more than 10 percent increase in the value of the U.S. dollar versus the Swiss franc has prompted some analysts to question whether the deal would be too costly.

Roche has said, however, the currency changes had not altered its willingness to do a deal. On Tuesday, when Roche reported its nine-month results, it said its strong cashflow in the U.S. was a natural hedge for the Genentech bid.

Genentech rejected the $89 per share offer, saying it undervalued the company. Shares of Genentech traded at $85.59, up $1.33, in midday trading on Tuesday. In a Reuters poll in August, the consensus of industry analysts was that Roche would have to hike its offer to about $107.50 per share, raising the cost of the deal to $53 billion from $43.7 billion.

Rodman & Renshaw analyst Christopher James said on Tuesday he saw $95 per share as a fair value for Genentech, and an acquisition premium would push the price “well above $100 per share.”

That’s a lot to finance, especially at a time when other mega-deals, such as InBev’s acquisition of Anheuser-Busch, have been slow to syndicated funding that was already secured.

Warren Buffett has a reputation for being a step ahead of the game in his financial investments. This certainly seems to be the case in Berkshire Hathaway unit MidAmerican Energy’s proposed acquisition of Constellation Energy. 

According to Constellation’s proxy statement, MidAmerican approached the liquidity-strapped power company on Sept. 16 with virtually the same deal the two companies agreed upon: $26.50 a share for Constellation, plus a $1 billion cash investment in convertible preferred stock. 

MidAmerican held firm on its terms. Constellation CEO Mayo Shattuck was initially dissatisfied with the deal price, but the only concession he could get from MidAmerican was a 7-hour delay of the Sept. 17 deadline it set for Constellation to sign the deal. 

Constellation clearly believed it had to sign the deal. The filing describes a company struggling to avoid a downgrade it believed would clearly push it into bankruptcy. And it knew time was running out — the company was worried that ratings agency Moody’s could pull the trigger on a downgrade in the absence of immediate action. 

Moreover, many of Constellation’s European trading counterparties had stopped doing business with the company by Sept. 18. And as Constellation teetered near financial disaster, the company’s board voted to back the deal.

GM may want to help Cerberus get out of the dismal auto business, but there are real doubts about where it comes up with the cash to put a deal together. Markets worry about financing for Altria’s deal for UST and even InBev’s purchase of BUD. We hear a lot about the early thaw of credit markets, but winter seems to be here to stay for a while in M&A. 
 
“Even marquee mergers of large companies with famous brand names have become more difficult and costly to close as the credit markets essentially remain frozen amid the global financial crisis,” reports Jessica Hall.
 
According to Hall, InBev has committed financing to acquire Anheuser-Busch, but the second round of loan syndication has been slowing. InBev last week postponed its $13.4 billion rights issue to complete the takeover but said it still plans to close the purchase this year. Altria said last week it would hold off closing its $10.4 billion purchase of UST until early January because its lenders advised that it would be better to close the deal in 2009.
 
And that’s just beer and tobacco, the more recession-proof end of the corporate spectrum. In the demolition derby that is the auto sector, Jui Chakravorty Das and Kevin Krolicki report that finding willing lenders relies heavily on a government aid. Chrysler has $9 billion of debt, which would have to be paid off as part of a deal if it cannot be refinanced. That would seriously deplete the $11.7 billion pile of cash that GM would grab as part of a deal. 
    
GM needs between $4 billion and $5 billion for payouts for the estimated 30,000 to 40,000 jobs that would be cut through a merger and to close most of Chrysler’s 14 assembly plants, sources have said. GM had about $21 billion in cash at the end of the second quarter, but it was burning through more than $1 billion a month and its market capitalization was only $3.7 billion at the start of this week.
 
Gina Keating reports that while the credit meltdown has throttled mega deals like Waste Management’s $6.7 billion takeover of Republic Services and United Technologies‘ $2.64 billion offer for Diebold, mid-market deals of $500 million and less are going through. 
    
She reports that data on U.S. merger and acquisition activity shows small and mid-sized deals are down but have been more resilient than deals of $1 billion or more so far this year.
    
Over the first three quarters of 2008, deals of $500 million or less are down just 18 percent, while deals in the large-cap space are down 41 percent, said analyst Matthew Toole of ThomsonReuters’ investment banking division.
    
For smaller deals, “you don’t need the huge high-yield financing and syndicated lending packages that the banks are just not willing to extend right now,” Toole said.
    
“We’ve heard the financing is available for those (smaller deals), or at least it was,” he said. “Certainly, with the credit issues we’ve had over the past month or two, that might be different” in the fourth quarter. 

Deals of the day:

* Novartis  has reached a deal to buy the pulmonary drug delivery unit of Nektar Therapeutics for $115 million in cash.

* The Paris and Amsterdam airport authorities will own 8 percent of each other in a strategic alliance and cross-shareholding agreement announced by the French government.

* Norway’s SpareBank 1 Alliance, a consortium of savings banks, has agreed to acquire failed Icelandic Glitnir Bank’s Norwegian arm for 300 million Norwegian crowns ($45.86 million), the alliance said.

* British financial services firm Evolution said it has agreed to acquire the investment management team of Singer and Friedlander Investment Management, a unit of nationalised Icelandic bank Kaupthing, for an undisclosed amount.

*Swiss drugmaker Roche Holding said it was committed to a $43.7 billion bid for the rest of Genentech and reported a 2 percent fall in nine-month sales to 33.3 billion Swiss francs ($29.26 billion).