The idea has been dismissed in most circles but the rumour that Novartis is planning a takeover bid for Bayer refuses to die down and the German firm’s stock has again climbed on the possibility over a deal.
Bayer’s shares rose 3.8% to 56.77 euros, having jumped 5.5% a week ago as the rumours of an offer from Novartis began to circulate. The source of such speculation remains unclear but it has been touted that Novartis could offer 70 euros per share, valuing Bayer at over 53.5 billion euros, and well over its current market capitalisation of around 44 billion euros.
The initial rumour was pooh-poohed by analysts at Dresdner Kleinwort who last week issued a note saying that "Novartis has suffered several setbacks lately and we don't believe the company is in a strong enough position to make a big acquisition now". The setbacks they referred to include delays to any US launch for its new diabetes drug Galvus (vildagliptin) and safety problems connected to its COX-2 inhibitor Prexige (lumiracoxib).
Nevertheless, given its history of acquisitions in the recent past, Novartis is always cited as being a potential buyer. This year it has received over $7.5 billion in cash from fellow Swiss firm Nestle through the sale of the Gerber baby food business, as well as its medical nutrition division, and chief executive Daniel Vasella has repeatedly spoken of building up its healthcare operations, particularly pharmaceuticals.
Bayer Healthcare would certainly do that, given that the unit is currently soaring, having just reported second-quarter sales of 3.72 billion euros of that figure, a leap of almost 65%. However the Leverkusen-based group comes with 13 billion euros of debt from its acquisition of Schering AG last year and its plastics and agrochemicals divisions, though in any deal, Novartis may look to sell this solid but maybe not core, businesses off to fund a purchase.
As to whether Bayer would be even vaguely interested in a deal is highly debatable as the integration of Schering has been smooth, sales are strong and its pipeline is looking impressive. Unsurprisingly, the firms have declined to comment on market speculation but that will not stop investors wondering for a while yet. By Kevin Grogan