Novartis mulling near $14-billion stake sale in Roche: sources

According to people familiar with the matter, Novartis is exploring options for selling its one-third stake in Roche's voting shares, worth almost $14 billion. "Sooner or later the stake will be sold and Novartis is talking to banks about how it could be done, but nothing is imminent," one source revealed. Novartis had collected the stake, equivalent to 6 percent of Roche shares overall, between 2001 and 2003 under former CEO Daniel Vasella as the basis for what turned out to be an unsuccessful merger attempt, and there has been speculation that it would sell the holding ever since Vasella stepped down in 2013. 

A recent report suggested Novartis might unload the holding via an order book process involving certain investors, with one source saying such a move would represent the "cleanest" way for divesting the stake. A second person with knowledge of the matter divulged that Novartis had expressed interest in preparing for such a sale in recent weeks. 

Meanwhile, analysts previously suggested that Roche could acquire the stake through a share repurchase programme. However, some have indicated the company may be constrained by the need to treat both classes of shareholders equally, whereas buying back a large portion of voting shares would serve to benefit only existing voting shareholders. 

Commenting on the renewed speculation, Bernstein analyst Tim Anderson noted that "Novartis is in a time of need, having had setbacks with both Alcon and [the heart-failure drug] Entresto (sacubitril/valsartan), and investor sentiment is languishing." Last week, Novartis posted lower profit and sales for the first quarter, with Entresto generating revenue of $17 million, below consensus estimates of between $20 million and $30 million, while its Alcon eye-care unit saw sales slide 7 percent to $1.4 billion. Anderson hinted that acquisitions in the biotechnology or ophthalmology sectors are "distinctly possible" options for Novartis.

For related analysis, see ViewPoints: Novartis said to consider sale of Roche stake.


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