Deal: Novartis Sells $21B Roche Stake To Roche

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Novartis (SWX: NOVN), a Swiss drugmaker, has clinched one of the biggest biotech deals of this year with a domestic rival, Roche (SWX: RO). It’s not a typical deal you see every time, such that Novartis has agreed to sell its stake in Roche back to Roche. 

  • Roche has said it’ll repurchase all of its shares held by Novartis. The drugmaker will pay 19bn Swiss Francs ($21bn) for 53.3 million shares held by Novartis, using debt to finance the deal. 
  • The deal ends a monetary alliance between both companies tracing back to two decades ago when Novartis began amassing its Roche stake for a total of $5bn. So far, the investment has yielded dividends of over $6bn for Novartis and is finally selling for $21bn, implying hefty profits
  • The transaction solidifies control for the pool of shareholders from Roche’s founding families over the company. Once it’s completed, their voting rights over Roche will increase to 67.5%. The deal will also increase the percentage of Roche shares that are publicly-traded from currently 16.6% to 24.9%.
  • Notably, Roche said its founding families weren’t directly involved in the deliberations of the deal, even though it very much favors them. The drugmaker pitched it as a good strategic decision favoring its business henceforth.
  • With its Novartis relationship dissolved, Roche will be “even better positioned strategically in the future to provide life-saving medicines and diagnostics to people around the world.“ its board Chairman Christoph Franz said.
On the other hand, Novartis has sought to refocus since its current chief executive Vas Narasimhan took over in 2018. His efforts have included spinning off Novartis’ eye-care unit in 2019 and last week unveiling a strategic review of its generic drugs division Sandoz, which may lead to a sale.

It appears that Novartis wants to streamline its focus on making targeted, non-generic drugs that are the typical big money-makers in the pharmaceuticals industry. Selling its Roche stake for a huge sum that’ll come in handy for drug development appears to be part of that play.

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