So much for that cultural stereotype about the Swiss being parsimonious and unwilling to part with hard-earned cash. Maybe it's just that the management team at Novartis (NYSE:NVS) really, really likes meeting with investment bankers. Whatever the case, this large pharmaceutical company is looking to get larger still by buying out the remainder of Chiron (NASDAQ:CHIR) that it doesn't presently own.
Prior to the opening of trading Thursday, Novartis announced it was offering $40 a share in cash for the 57.8% of Chiron that it doesn't already own. Should the deal get approved at this price, it would be about a $4.5 billion purchase for Novartis. Of course, that "should" could be a bit sticky -- the stock of Chiron has jumped to more than $49 a share as of this moment.
While investors might be bidding up for either a better offer for Novartis or a rival to come into the picture, I'd say that Chiron probably would be more favorably inclined to sticking with Novartis, if possible. After all, not only has Novartis owned a big chunk of Chiron for some time, but Chiron opened its books to Novartis prior to this bid -- generally a strong sign of a preferred buyer.
For Novartis, this marks nearly $14 billion in merger and acquisition spending for the past year. The company spent about $8.3 billion to bring in generics makers Eon and Hexal and close to another $700 million for Bristol-Myers' (NYSE:BMY) OTC business. That's a lot of money to spend on burnishing a business that was pretty good already.
Is Chiron worth the fuss? Maybe. Despite well-known problems, the company has a respectable franchise in vaccines, as well as anti-infectives and blood testing. While Chiron is only just emerging from the manufacturing debacle that kept it out of the U.S flu vaccine market last year, there's solid technology underfoot. Of course, this is not a market without competition: Sanofi-Aventis (NYSE:SNY), GlaxoSmithKline (NYSE:GSK), and to a lesser extent MedImmune (NASDAQ:MEDI) all want more than their fair share of the vaccine pie.
It would certainly appear that Novartis management really wants to augment and reshape the company -- but it's not like there was anything really wrong with Novartis before. In any case, mergers always present a challenge for the buyer and Novartis seems to want to take on several successive challenges. I still like Novartis as a company, but I'm beginning to wonder whether all this activity might not lead to at least a few quarters of turbulence.
More on Novartis:
- Novartis' Over-the-Counter Tonic
- Chiron's Tragic Quarter
- These Swiss Don't Miss
- Novartis' Triple Threat
Fool contributor Stephen Simpson owns shares of Sanofi-Aventis. The Fool has an ironclad disclosure policy.
