Novartis finally sells Roche stake, for almost $21 billion

After more than 20 years, Novartis has finally decided to sell its substantial share in fellow Swiss pharma group Roche for $20.7 billion, a decent return on its original $5 billion investment.

The agreement will see Novartis lose its one-third voting share stake in Roche, after agreeing to sell 53.3 million Roche bearer shares at their average price over 20 days prior to 2 November, when the deal was agreed.

Once Roche repurchases the shares – assuming shareholders in the company agree to the deal at a meeting schedule for 26 November – they will be cancelled, and the result will be that the pool owned by shareholders of the founding Hoffmann-La Roche families in Roche will swell to around 67.5%.

Novartis chief executive Vas Narasimhan said this morning that “now is the right time” to monetise the investment, and that the company would use the proceeds “in line with capital allocation priorities,” which includes investment in its R&D pipeline.

There is already speculation that Novartis may use the cash raised by the sale for pipeline-boosting acquisitions.

Roche CEO Christoph Franz said meanwhile that the deal “is in the best interest of Roche and the holders of Roche equity securities from a strategic and economic perspective.” The company will use debt to finance the transaction.

Disentangling the two companies would increase Roche’s flexibility and leave it “better positioned strategically in the future to provide life-saving medicines and diagnostics to people around the world,” he added.

Novartis has been mulling the sale of the stake for years, but was reluctant to do so piecemeal on the open market, and had been hoping for a deal with Roche to make its exit as smooth as possible.

The decision to press the button on the deal comes as Narasimhan is ramping up a restructuring of the group. Novartis has already spun off eyecare unit Alcon, and is now looking into the future of its Sandoz generics business.

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