Drug Giant Novartis Buys Stake in Rival Roche

Swiss pharmaceutical giant Novartis said it had bought 20% of the voting shares in rival Swiss drug firm Roche Holding for about $2.8 billion, a move that analysts said could be a prelude to a merger. Novartis bought the stake--32 million shares in Roche Holding--from the Swiss-based investment house BZ Gruppe Holding. A merger would create a powerhouse with more than $20 billion in annual drug sales, nearly as big as sector leaders Pfizer Inc. and GlaxoSmithKline. Novartis officials said the deal had opened up their strategic options. But a merger would need the backing of the two families whose investor pool controls 50.1% of Roche’s votes. Novartis is paying about $87 a share, a premium of about 5% over Friday’s close. Roche said the current majority holding--50.1% owned by the Hoffman and Oeri-Hoffman families--was unaffected. Novartis’ American depositary receipts rose 52 cents to close at $39.32 on the NYSE, while Roche Holding’s ADRs rose $2.50 to close at $79.50 in over-the-counter trading.