Novartis Agrees to Sell its Stake in Roche for $20.7 Billion, Parting Ways After 20 Years

Novartis Agrees to Sell its Stake in Roche for $20.7 Billion, Parting Ways After 20 Years

November 08, 2021

Novartis, a global healthcare company based in Switzerland, announced that it agreed to sell its stake in Roche for $20.7 billion, with the proceeds to be used "in line with capital allocation priorities to enhance strong returns to shareholders."

"After more than 20 years as a shareholder of Roche, we concluded that now is the right time to monetise our investment," remarked Novartis CEO Vas Narasimhan.

The drugmaker paid roughly $5 billion for the share, claiming that it has generated regular earnings contribution and cumulative dividends of more than $6 billion during the holding period.

The sale of the stock will result in a profit of around $14 billion for Novartis.

According to Roche, the transaction will cause the "disentanglement of the two competitors" and the return of "complete strategic flexibility."

"I am sure that the anticipated deal is in Roche's best interest...from a strategic and economic standpoint," said Christoph Franz, chairman of Roche's board of directors.

The deal does not result in a change of control at the company, according to Roche, albeit the founding families' voting power will climb to approximately 67.5% once the transaction it is completed.

The transaction has been approved by the board of directors, and shareholders will vote on the deal on November 26, 2021.

According to Jefferies analysts, the deal benefits both firms, raising Roche's earnings per share by around 7% and enabling the company to maintain profit growth next year, when COVID-19-related sales could ebb.

Meanwhile, the analysts pointed out that the deal will streamline Novartis' structure even more, clearing the path for future acquisitions.

Financial Times said that Novartis approached Roche "weeks ago" about a transaction, citing a source close to the two companies, who said, "we were not expecting it, it came as a surprise."

The source noted that there were "a couple of rounds of negotiation" until a deal was made late on November 3 with Novartis seeking a higher price.