Novartis plans open offer for 39% stake

Written by Corporate Bureau | Mumbai | Updated: Mar 26 2009, 06:01am hrs
The $41.5-billion Swiss drug-maker, Novartis AG, on Wednesday said it will buy an additional 39% stake in its Indian subsidiary, Novartis India Ltd. This will be done through an open offer to public shareholders at a 27% premium over Tuesdays price of Rs 275.60 per share on the Bombay Stock Exchange.

Basel-headquartered Novartis AG will spend Rs 440 crore (about $87 million)at the current offer price of Rs 351 a shareto raise its stake in the Indian subsidiary from 50.9% to about 90%, the company said in a note to the BSE.

Institutional investors hold close to 20% in the company while the remaining 25.55% is with the public. The plan, therefore, potentially opens the way for the delisting of Novartis India from the stock exchange as Sebi norms allow companies to do so once the public float goes below 10%. Overall, MNCs are looking at consolidating their position in emerging markets like India, according to Sarabjit Kaur Nangra, vice president-research at Angel Broking.

Following the announcement, Novartis shares rose 20% or Rs 55.10 on the Bombay Stock Exchange on Wednesday to Rs 330.70. The offer also represents a premium of 35% over Novartis India Ltds average share price during the last month.

According to Ranjit Kapadia, head of private client group at Prabhudas Liladhar, Novartis is likely to increase the offer price from the current Rs 351. Kapadia said the share price could go up again. The company will be forced to increase the offer price. The Rs 440-crore thats been set aside for a 39% in a company with a market cap of Rs 880 crore is not sufficient at all, he added. Nangra, too, said the share prices of most subsidiaries of multinationals in India have been languishing.

The company statement said the offer for these shares is expected to open in May 2009 and is subject to regulatory approvals.

Novartis India, a leading provider of preventive vaccines, diagnostic tools and consumer health products, has the most-sought after pain killer drug, Voveran, as its flagship brand. Calcium Sandoz is another popular brand of Novartis, sold through its generic arm, Sandoz.

For FY08, Novartis India had an income of Rs 612.39 crore and a net profit of Rs 97.23 crore. Parent Novartis was created in 1996 through the merger of Ciba-Geigy and Sandoz. Novartis has operations in over 140 countries and over 91,000 employees on its rolls.