independent

Sunday 20 April 2014

Novartis to look at $10bn deal to bolster business

An aerial view of the Novartis facility in Ringaskiddy

NOVARTIS will start a strategic review of its units as early as next week and would consider a $10bn (€7.5bn) purchase among options for bolstering the business, chairman Joerg Reinhardt said.

"We will also start next week to look at our portfolio based on strategic perspectives going forward," Mr Reinhardt said.

While smaller deals remain attractive, "Novartis would be willing to invest significant money for a very good opportunity. I don't think a $10bn acquisition is out of reach".

Novartis is one of the largest multinational employers in Ireland, with a huge operation in Ringaskiddy, Co Cork.

Mr Reinhardt, who took over as chairman this month, is facing investors' calls to unwind key parts of the company his predecessor Daniel Vasella built. The company will probably come to a decision on its composition over the next few months, Mr Reinhardt said.

"Novartis is a diversified business, it will continue to be a diversified business," he said.

"On the other hand, I believe active portfolio management is part of the strategic management of the company."

Mr Reinhardt worked at Novartis for 28 years before joining Bayer in 2010 to run the healthcare business. He left Novartis after losing the contest for chief executive officer to Joe Jimenez, the current CEO.

Novartis rose 0.7pc in Zurich trading. The stock has increased 23pc in the past year including reinvested dividends, compared with a 19pc return for the Bloomberg Europe Pharmaceutical Index.

The Swiss company has five units. Novartis wants its businesses to be among the industry leaders or will otherwise consider divesting them, Mr Reinhardt said.

Novartis is out of the bidding for Onyx Pharmaceuticals, according to a person familiar with the situation. Onyx's current valuation made it too expensive.

"It makes sense to have the vaccines business in a separate unit because of "idiosyncrasies" in production, distribution and marketing, Mr Reinhardt said.

"Obviously there are potential synergies in the backbone, finance and other supportive functions," he said, referring to the drug and vaccines units.

"People are currently looking at that, but it's too early to quantify potential synergies a combination would bring," he added. (Bloomberg)

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