Novartis to sell its shares back to Roche in $20.7 billion deal

The two Swiss drugmakers had been intimately tied for 20 years thanks to a long-lasting ownership.

On Thursday Novartis, a long-time Roche stakeholder announced that the two drugmakers had reached an agreement for Roche to purchase it’s approximately one-third voting position in its cross-town rival for $20.7 billion. Novartis said in a statement that it has agreed to sell $53.3 million Roche bearer shares for $388.99 per share, which is based on the volume-weighted average price of Roche non-voting stock certificates over the last 20 trading days through November 2nd. Novartis has been a stakeholder since May 2001, and presently owns a large portion of bearer shares of Roche's common stock which accounts for roughly 33% of all outstanding bearer shares. “After more than 20 years as a shareholder of Roche, we concluded that now is the right time to monetize our investment,” said Novartis Chief Executive Vas Narasimhan.

Between 2001 and 2003, Novartis paid roughly $5 billion for the stake as a long-term financial commitment that resulted in large, recurring earnings contributions and cumulative dividends in excess of $6 billion. This resulted in an annualized return of 10.2 percent in US dollars throughout the stake's holding term (and 6.6 percent in CHF). Novartis no longer considers Roche's financial investment to be a part of its core business, and hence no longer a strategic asset. Novartis expects to gain around $14billion from the sale of the stock, which will be core adjusted. The transaction is subject to the approval by the shareholders of Roche at an extraordinary general meeting to be held on November 26.