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5 November 2021Big Pharma

Novartis to sell Roche shares back for $20.7 billion

Novartis yesterday, November 4, announced that it is selling its entire stake in Roche—equating to 53.3 million bearer shares—back to the Swiss healthcare company for the sum of $20.7 billion.

Swiss-American pharmaceutical company Novartis’s 53.3 million bearer shares of Roche’s common stock represent approximately 33% of the aggregate outstanding bearer shares. Novartis acquired its stake between 2001 and 2003 for approximately $5 billion.

The decision to purchase shares in Roche was a long-term financial investment which has delivered significant and recurring earnings, Novartis reported, with cumulative dividends totalling more than $6 billion.

However, according to yesterday’s release, Novartis no longer considers its financial investment in Roche a part of its core business, meaning that it is not a strategic asset to Novartis as a “focused medicines company”.

Vas Narasimhan, CEO of Novartis, 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.”

Novartis’s shares are being sold at the price of $388.99 per share. This is said to be reflective of the volume-weighted average price of Roche’s non-voting equity certificates over the 20 trading days leading up to November 2, 2021.

The deal is subject to approval by Roche’s shareholders. It will be covered at the Extraordinary General Meeting of Roche, to be held on November 26.

According to Roche, the repurchase is conditional upon the approval of a capital reduction by cancellation of the repurchased shares and the approval of the interim financial statements prepared for the purpose of the transaction by the above meeting.

The Swiss healthcare company said that its board of directors has already approved the deal, which will be debt-financed by Roche.

Christoph Franz, chairman of the board of directors of Roche, commented: "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.”

Roche said that the disentanglement of the two competitors means that it regains strategic flexibility. All holders of Roche equity securities will benefit from the earnings accretion resulting from the transaction.

Roche intends to cancel the shares it is repurchasing from Novartis after the purchase is completed, which will result in the percentage of the company held by the public increasing from 16.6% to 24.9%.

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