Mumbai: Swiss drug maker Novartis AG has raised its offer price for acquiring a 39% stake in Novartis India Ltd by 28%, from Rs351 to Rs450. Novartis, which holds a 50.9% stake in its local subsidiary, had made an open offer to Indian public shareholders in March.
In a notice to stock exchanges, Novartis’ open offer manager DSP Merril Lynch Ltd said on Thursday that following the rise in the offer price, the company will have to spend Rs560.91crore to acquire the 39% stake.
The offer will close on 8 June.
Basel-based Novartis said in late March that it wanted to raise its stake in Novartis India to about 90%, offering Rs351 a share to public stakeholders—a 27% premium to the closing price of Rs275.60 the previous day on the Bombay Stock Exchange (BSE).
The Novartis India stock rose 14.17% on Thursday to close at Rs444.80 on the BSE while the exchange’s benchmark index, the Sensex, gained 1.32% to 14,296.01. Since the last week of March, when the company made its open offer, the Novartis stock has risen 61.39%.
Although the company maintained that it had offered a considerable premium in its March announcement, the rise of Novartis India shares prompted several stock analysts and corporate advisers to predict that the response to the open offer would be poor unless the price was raised.
“We believe that our initial offer provides a fair deal, offering shareholders a considerable premium over how the stock was trading prior to the announcement,” Novartis spokesperson Eric Altoff said in an 18 May email to Mint.
Mint sent an email query to Novartis on Wednesday evening to confirm information about the company’s decision to revise the price, but Altoff declined comment, saying, “Novartis generally does not comment on rumours.”
A Novartis India spokesperson too said on Wednesday that she wouldn’t be able to confirm the information.
Novartis, in its open offer document, claimed that raising the stake to 90% in the Indian subsidiary would provide more operational freedom for the company.
A pharma industry analyst with a Mumbai-based brokerage said the revised price seemed reasonable, given that the Swiss parent would likely invest more in the subsidiary after raising its stake.
“One can expect positive response from the shareholders, especially institutional investors, to this offer at this price,” he said.
This analyst didn’t want himself or his company to be identified because it serves a group of institutional investors who hold Novartis shares.