Swiss drugmaker Novartis has increased its offer price to acquire an additional 39 per cent in Novartis India Ltd, from the initially proposed Rs 351 to Rs 450 a share.
The 28 per cent hike in offer price was to reflect the change in the local stock market environment, an investment banking official told Business Line. Novartis shares shot up on the development, closing the day, up 14 per cent, at Rs 444.80 on the BSE.
Novartis made public its intention to increase its stake from 51 per cent to 90 per cent in March. Even then the price was at a 27 per cent premium, and the stock market was at about 10,000, he said.
Post-election, the market condition has improved to 14,000 levels and the parent company decided to hike the offer price so the shareholder would get a fair price, he added.
The revised offer represents a premium of 63 per cent to the closing share price of Rs 275.6 of Novartis India on March 24, which was the last trading day before the announcement of the offer, said a note on behalf of Novartis AG. The open offer will close on June 8.
Novartis stock is within striking distance of the revised price and is likely to breach the changed price in the days to come, said Mr Ranjit Kapadia, HDFC Securities’ Vice-President (Institutional Research).
There is no upside left for the investor to surrender shares, he added. It appears that Novartis is set to delist the Indian unit, he added.
The last time Novartis shares touched such a peak was in 2006, followed by a day or so in the peak market condition prevailing in January 2008, the investment banker countered.
Delist
Though the company has indicated in the past that it is not headed to delist the local entity, a market-observer said that it could consider the option, depending on the local environment.
Novartis is locked in a legal patent-related battle over its cancer drug Glivec. The outcome of this litigation will be significant not just for Novartis, but will also set a precedent in the domestic market that has started honouring product patents from 2005.
Eye on Pfizer
Other drugmakers such as Matrix, Pfizer and Merck are also in the process, or are preparing for open-offers, respectively. But analysts are keeping an eye on the Indian arm of Pfizer, with the parent company having indicated that it would increase its indirect stake in it to 75 per cent, from the present 41 per cent — a consolidation prior to its integration with Wyeth.
Pfizer’s offer price to acquire 33.77 per cent stake in its Indian arm was Rs 675 per share. Pfizer’s share price on Thursday was Rs 744 on the BSE.
Source: The Hindu Businessline