Roche and Novartis Part Ways With Share Purchase

After making a profit of $6bn over two decades, Novartis is to sell its stake in fellow Swiss drugmaker Roche for more than $20bn.

Novartis has held the 53.3 million bearer shares in Roche – approximately one-third of the total – since it started acquiring a stake in the company in the early 2000s for a possible merger. The proposed merger, masterminded by ex-Novartis CEO Daniel Vasella, was vetoed by the Hoffman-La Roche family that controls Roche.

The price of $388.99 per share reflects the volume-weighted average price of Roche non-voting equity certificates (Genussschein) over the last 20 trading days.

The transaction makes no difference in the control of Roche as the 'pool' of shares controlled by the Hoffman-La Roche family means they hold a majority at Roche general meetings, although the voting power of the family pool will increase to just over two-thirds once the transaction is complete.

Roche says representatives of the family pool did not participate in the deliberations around the repurchase from Novartis. Roche's board of directors has approved the repurchase, which will be debt-financed.

“I am convinced that the envisaged transaction is in the best interest of Roche and the holders of Roche equity securities from a strategic and economic perspective,” said the chair of its board, Christoph Franz. “As a result, Roche will be even better positioned strategically in the future to provide life-saving medicines and diagnostics to people around the world.”

Roche added that the deal, which came as a surprise to the company when Novartis approached them a few weeks ago, would mean 'the disentanglement of the two competitors' in order to 'regain full strategic flexibility'.

Vas Narasimhan, CEO of Novartis, said: “After more than 20 years as a shareholder of Roche, we concluded that now is the right time to monetise our investment. Today's announcement is consistent with our strategic focus and we intend to deploy the proceeds from the transaction in line with our capital allocation priorities to maximise shareholder value and continue to reimagine medicine.”

Analysts at financial consultants Jefferies said the deal was positive for both companies and would boost Roche's earnings per share by 7% and help sustain profit growth next year, when COVID-19-related sales could decrease. For Novartis, the sale would simplify its structure and allow for other acquisitions.