Novartis puts $14B Roche stake up for sale: Reports

Joerg Reinhardt

Will Novartis sell its big stake in crosstown rival Roche? That’s been the question for years now, as Big Pharma worked its way through blockbuster patent expirations and restructured to compensate--and the queries only grew louder after new chairman Joerg Reinhardt promised to look at all of Novartis’ assets for potential sale.

Now, the answer appears to be yes.

Swiss newspaper Sonntagszeitung reported on Sunday that Novartis ($NVS) is working with investment banks to line up potential buyers for the 13.5 billion francs’ worth of Roche ($RHHBY). Novartis wants to sell to institutional buyers rather than unload the stock on the open market, partly because it wants to collect a premium on the current trading price.

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The Novartis stake amounts to 33% of Roche’s voting shares, and as Bernstein analyst Tim Anderson pointed out in a Sunday investor note, assembling this large a block of voting shares wouldn’t be an easy task on the open market. But as the Sonntagszeitung says, Roche plans to remain independent in any case--and the Oeri and Hoffman families still own a controlling interest--so owning such a large block might not interest many investors.

The Sonntagszeitung’s sources say that unloading the Roche stake is one of Reinhardt’s “highest priorities.” 

Novartis has considered a few other sale options in the past, including handing out the Roche shares as a dividend to its own shareholders, the newspaper notes. Novartis also weighed swapping its shares back to Roche, but Roche has repeatedly indicated that it’s not interested.

This time around, Novartis wants to take bids from select investors, to make sure that the buyers would be acceptable to Roche, the newspaper says.

Rumors have also swirled that Novartis pushed Roche for a merger. That talk heated up in 2014, after Reinhardt took over as chairman. Reinhardt met with outgoing chairman Franz Humer and exchanged messages with incoming chairman Christoph Franz. "Two pharma groups working in the same location have many topics in common," Reinhardt said at the time, but disavowed any interest in a merger.

Reinhardt also said that he intended to hang on to the Roche shares--“For as long as Roche does well, we take pleasure in them,” he said--but the company soon after indicated that it would be open to selling its stake. 

The big question isn’t to whom Novartis might sell its chunk of shares, but what it might do with the proceeds, Anderson points out. Will the company make a deal? “This is distinctly possible--Novartis is in a time of need, having had setbacks with both Alcon and Entresto, and investor sentiment is languishing,” the analyst said in his Sunday note. “But, would an acquisition in the teens billion dollar range be a transformative deal? No. Rather, it would be a mid-sized bolt-on, but one that investors might be receptive to, given the current state of the business.”    

- see the Sonntagszeitung story (German)

Related Articles:
No merger talk here: Novartis just wants to be friends with Roche, chairman says
Novartis' Jimenez says no need to sell Roche stake

Pictured above is Novartis Chairman Joerg Reinhardt.

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