Novartis sells a third of Roche for over $20bn

1/3 of Roche will be sold for over $20bn by Novartis after two decades of success, resulting in $6bn profit. This move facilitates potential future acquisitions.

Since the early 2000s, Novartis has been gaining shares in Roche with the potential for the two companies to combine in future. They now obtain a third of the total shares (over 50 million) for Roche. A previous Chief Executive Officer of Novartis (Daniel Vasella) spearheaded the move to merge; however, the Hoffman-La Roche family has refused to allow this.

Roche claims that the family spokespeople had no part in the conversations regarding the by back from Novartis. The board of directors for Roche has decided to allow the repurchase and has established that any money borrowed will be paid back with interest in the future.

The board’s chair, Christoph Franz, said “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. 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.”

Chief Executive Officer of Novartis, Vas Narasimhan, 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.”

Financial consultants claimed that the decision was beneficial for both Novartis and Roche, as Roche will see earnings increase 7% per share. This will play a big part in continuing profit growth for 2022 when sales related to Covid 19- may see a reduction. For Novartis, this would pave the way for future acquisitions and remove the complexities from its business structure.