Blackstone, Carlyle Mull Joint Bid for Novartis Generics Arm

(Bloomberg) -- Blackstone Inc. and Carlyle Group Inc. are in talks about potentially teaming up on a bid for Swiss drugmaker Novartis AG's generics unit, in what could rank as one of the biggest-ever buyout deals, people with knowledge of the matter said.

The private equity firms have been studying the merits of a joint offer for the Sandoz business, which could be valued at around $25 billion, according to the people. Advent International, Hellman & Friedman and KKR & Co. are separately weighing bids for the business, the people said, asking not to be identified because the information is private.

Some of the funds could partner given the size of the asset, the people said. German drugmaker Stada Arzneimittel AG's private equity owners, Cinven and Bain Capital, have also been examining the business, the people said.

Swedish buyout firm EQT AB has been working with Germany's Struengmann family, who previously sold their generic pharmaceutical company to Novartis, as it studies an offer for Sandoz, according to the people.

Shares of Novartis gained 1.2% in Swiss trading Tuesday. Deliberations are at an early stage, and the suitors could decide against teaming up or proceeding with bids, the people said.

Strategic Review

Novartis said in October it was starting a strategic review of Sandoz to maximize shareholder value. Sandoz makes generic drugs and has expanded in recent years to develop biosimilar copies of complex, expensive biological medicines.

Basel-based Novartis hasn't made a final decision on whether to spin off or sell the unit, the people said. A potential tax hit from a straight sale could also influence the decision, they said. Representatives for Advent, Bain, Blackstone, Carlyle, Cinven, EQT, KKR, Novartis and the Struengmann family declined to comment. Spokespeople for Hellman & Friedman didn't immediately respond to a request for comment.

Sandoz is among the biggest potential corporate carveouts in the pipeline this year. Buyout funds have also signaled interest in GlaxoSmithKline Plc's consumer unit, though they may ultimately decide the potential 50 billion-pound ($67 billion) price tag is too expensive.

Private equity firms are also preparing for German national railway operator Deutsche Bahn AG to potentially sale a stake in its Schenker logistics unit if management and the new government can agree on exit plans, people familiar with the matter said.

Club Deals

Sandoz has been suffering from price erosion and tough competition, and its sales were stagnant at $9.6 billion in 2020. Covid-19 was a blow, as public-health measures and social distancing led to less demand for cough and cold remedies.

Prior to the beginning of the strategic review, Novartis had already worked for more than two years to make Sandoz more independent by splitting off manufacturing and support functions.

Buyout firms have increasingly been teaming up as they chase larger and larger targets. Blackstone, Carlyle and Hellman & Friedman agreed in June to buy medical supply company Medline Industries Inc. in a deal valued at more than $30 billion.

Hellman & Friedman partnered with Bain buy medical information technology company Athenahealth Inc. for $17 billion in November last year. In Europe, Bain and CVC Capital Partners formed a consortium as they study a bid for Walgreens Boots Alliance Inc.'s international drugstore business, which could be valued at as much as 7 billion pounds, Bloomberg News has reported.