Roche Gets Shareholders Nod to Repurchase $21B Equity Stake Held By Novartis

In early November, Roche announced an agreement with Novartis to buy back 53.3 million shares of Roche held by Novartis at CHF 356.9341 per share. This was equivalent to 33% of Roche’s voting stake, which was worth a total of $20.7 billion.

Roche termed the repurchase as a “disentanglement of the two competitors” that gave it full strategic flexibility without having to obtain Novartis’ approvals for key decisions.

“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,” Christoph Franz, Chairman of the Board of Directors of Roche, said in a statement at the time.

Shareholder Approval

At an extraordinary general meeting held on November 26th, Roche shareholders approved all proposals of the Board of Directors. The shareholders approved the audited statutory interim financial statements of the Company as of 31 October 2021 with a majority of 100.00%, Roche said.

“Today’s resolutions of the Extraordinary General Meeting are in the best economic and strategic interest of Roche. As a result, we will be even better positioned to make a contribution to the health of people around the world,” said Franz.

Novartis got hold of Roche’s equity stake from Swiss activist investor Martin Ebner who sold his shares out of frustration. The Swiss pharma giant acquired the stake between 2001 and 2003 for a total consideration of approximately $5 billion in the hopes of a mega-merger down the lane.

Although this huge transaction restricted Novartis from investing in other assets, the Roche stake delivered significant, recurring earnings contribution and cumulative dividends in excess of $ 6 billion. Over the holding period of the stake, Novartis gained an annualized return of 10.2 % in USD (and 6.6% in CHF).

The repurchase deal will bring Novartis’ 20-year-old investment to a close but would yield it enough capital to spend on M&As. The transaction is expected to close in early December.

Author

Rajaneesh K. Gopinath