SoftBank buys $5bn stake in Roche

Softbank Group, Japan’s second largest public company, has bought $5bn of Roche’s non-voting stock, making it one of the company’s largest investors.

The stock purchase was made through a unit responsible for the ‘Nasdaq whale’ trade last year, which saw the purchase of billions of dollars of US equity derivatives. The trade was masterminded by former Deutsche Bank trader Akshay Naheta through his company, SB Northstar, which has been behind some of SoftBank’s most controversial investments.

However, the Roche purchase comes just months after SoftBank founder, Masayoshi Son, announced he would slash investments by SB Northstar after losses of $5.6bn since it was set up in July 2020.

Until now, SB Northstar’s investment focus has been on tech and early stage biotech, so the purchase of a substantial stake in a large pharmaceutical company has surprised many.

The deal has not been confirmed publicly by SoftBank or Roche butthose close to the dealreport that it is motivated by Roche’s diverse portfolio as a simple bet on the company’s share price. It is reported that SB Northstar is convinced that Roche can grow from its current $380bn market value into a $1tn company.

SoftBank also believes Roche’s Genentech division – focused on data-based drug discovery and development – is undervalued.

Shares of the Basel-based company have risen 18% this year, following a drop in sales during the pandemic. Strong demand for its COVID-19 tests saw Roche’s diagnostics sales grew 51% in the first half of 2021, to make up about a third of the group’s overall revenues of SFr31bn ($34bn). Its rheumatoid arthritis drugs, Actemra, has also been repurposed to treat severe COVID-19 patients and is recommended by the World Health Organization, while the company has developed a COVID-19 antibody treatment with US company Regeneron.

A bounceback in routine treatment following the pandemic has also helped the company return to growth.

Roche has a dual-class share structure with both voting and non-voting shares. The founding families own 50.1% of the voting class, while rival Novartis holds one-third.