The merger of Sandoz Ltd. ("Sandoz") and Ciba-Geigy Ltd. ("Ciba") is based on a relatively short merger agreement (dated 6 March, 1996). This was made possible by - although short - specific provisions of the Swiss Federal Code of Obligations on the merger of companies. Thus, the merger agreement does not have to deal with the transfer of rights and obligations but focuses on other issues.

The merger agreement was made available to the shareholders of Sandoz and Ciba together with other documents in view of the shareholders' meetings of Sandoz, Ciba and Novartis Ltd. (the newly established company; "Novartis") of 23 and 24 April, 1996.

I. The merger agreement

The merger agreement consists of, in printed form, 9 pages. It was entered into by Sandoz, Ciba and Novartis.

The merger agreement provides that Novartis shall absorb both Sandoz and Ciba with retroactive effect as per 1 January, 1996. This means that all assets and liabilities of Sandoz and Ciba are transferred by way of a STATUTORY UNIVERSAL SUCCESSION to Novartis.

The merger agreement further concisely states that, after the merger, Novartis shall spin-off the operational businesses into subsidiaries to be established and that the construction chemicals activities of Sandoz shall be disposed off, and the operations and businesses of the speciality chemicals activities of Ciba shall be transferred into a newly created company ("Speciality Chemicals") the shares of which shall be distributed pro rata to all the then shareholders of Novartis.

Core provisions of the merger agreement fix the exchange ratio for the exchange of Sandoz shares and Ciba shares into Novartis shares and deal with the shareholders' meetings of Sandoz, Ciba and Novartis.

The merger agreement subjects the merger to APPROVAL BY THE SHAREHOLDERS of Sandoz, Ciba and Novartis. It is deemed approved if:

  • each of the shareholders' meetings approves the merger;
  • Sandoz does not resolve dividend payments in excess of SFr. 15 per share nor Ciba in excess of SFr. 20 per share;
  • Novartis resolves an increase of its share capital from SFr. 100,000.-- to SFr. 1,442,602,340.-- being paid by the transfer of all assets and liabilities of Sandoz and Ciba; and
  • those individuals designed in the merger agreement are appointed as members of the board of directors.

In the event that the shareholders' meeting of either Sandoz or Ciba does not approve the merger, the other party is entitled to an indemnity of SFr. 50 mio.

Another important part of the merger agreement relates to defence measures for the case of a take-over offer by a third party.

Two other provisions very shortly deal with the information exchanged prior to the signing of the merger agreements and transactions prohibited during the period from the signing to the closing of the merger.

The merger is deemed effected when (i) the increase of the share capital of Novartis, (ii) the dissolution of Sandoz and (iii) the dissolution of Ciba are recorded in the Commercial Register.

II. The proposed structure of the Novartis Group

Immediately upon the merger, Novartis shall be structured as a holding company:

  • It will hold all the shares in Speciality Chemicals which will hold the Speciality Chemicals Operations. The operations and businesses of the speciality chemicals activities of Ciba will be transferred to the latter company.
  • A new company shall be established to which all assets and liabilities of the core activities of Ciba and a few participations closely related to such activity shall be transferred.
  • Novartis will own other former participations of Ciba and Sandoz, real estate of Ciba, financial assets, intra-group-loans and intangible property.

The described structure shall be realised with retroactive effect as per 1 January, 1996, by transferring the respective assets, assumptions of the respective liabilities pursuant to a specific provision of the Swiss Federal Code of Obligations and by assignment of contracts.

The content of this article is intended to provide general information on the subject matter and is not a legal advice. An individual matter requires legal advice according to the specific circumstances.