As a challenging environment for leveraged buyouts makes a prospective sale to private equity more challenging, Novartis AG is moving toward a spinoff of its generic pharmaceuticals unit, according to people familiar with the matter.
The people, who asked not to be named because the information is private, said that the Swiss pharmaceutical giant sees a separate offering of the $25 billion Sandoz division as increasingly plausible. According to the people, Novartis hasn’t made a choice yet and is still considering a number of options for the company.
In order to maximize shareholder value, Novartis said in October that it has begun a strategic assessment of Sandoz.
Private equity investors showed early interest in the company as they assessed what may have been one of the largest buyout deals in history.
A prospective joint proposal for Sandoz was discussed by Blackstone Inc. and Carlyle Group Inc. The business was also being studied by Advent International, Hellman & Friedman, and KKR & Co., according to others with knowledge of the situation at the time.
A Novartis spokesman reported that the strategic evaluation is still in progress. The Basel-based corporation will deliver an update by year’s end, and all options are still on the table, he added.
The environment for business deals has dramatically deteriorated recently as a result of declining bank lending for large takeovers, rising inflation, the conflict in Ukraine, and unpredictable stock markets.
Over $25 billion in transactions have been affected by the shaky credit markets, with several high-profile agreements, like the £5 billion sale of Walgreens Boots Alliance Inc.’s UK pharmacy business, falling through in part due to a shortage of accessible funding.
The consumer health division of British pharmaceutical company GSK Plc will be spun off on July 18 in what is anticipated to be the largest listing on the London Stock Exchange in the past ten years. Prior to GSK finalizing the split’s specifics, private equity investors had shown early interest in that company.
One of the main issues facing Novartis CEO Vas Narasimhan as he attempts to refocus the company on more lucrative and high-growth areas is what to do with Sandoz. The company anticipates that the US generic medication unit’s sales would continue to decline all throughout this year.
