The company currently holds 53.3 million bearer shares of Roche’s common stock, representing approximately 33% of voting shares.
The deal will separate the two Basel-headquartered Swiss competitors.
Novartis says stake is not a strategic asset
Novartis acquired its stake in Roche between 2001 and 2003 for around $5bn in total as a long-term financial investment: estimating the stake has delivered cumulative dividends in excess of $6bn.
However, in a statement today, the company said that it ‘does not consider the financial investment in Roche as part of its core business and therefore not a strategic asset’.
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 monetize 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 maximize shareholder value and continue to reimagine medicine.”
Roche doubles down on strategic position
Roche says the repurchase of the shares will ‘disentangle’ the two Swiss competitors.
It intends to cancel the repurchased shares. The percentage of free float shares will increase from 16.6% to 24.9%, allowing the shares to be includes in the Swiss Performance Index (SPI) and possibly in other indices.
The transaction does not result in a change of control, as the pool formed by shareholders of the founding families has held the majority of the votes. The voting power of the family pool will increase to around 67.5%.
Christoph Franz, Chairman of the Board of Directors of Roche, 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.”
A price of $388.99 per share (CHF 356.93 per share) reflects the volume-weighted average price of the Roche non-voting equity certificates (Genussschein) over the last 20 trading days ending on November 2, 2021
Novartis will report a gain from the sale of the stake in income from associated companies of approximately $14bn, which will be core adjusted.
The transaction is subject to the approval by Roche shareholders in an Extraordinary General Meeting of Shareholders on November 26, 2021.