A new star
Two cultures
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    When Ciba and Sandoz announced their merger to form Novartis on March 7, 1996, the world looked toward Basel. Media from around the globe reported on what was at that time the largest merger in industrial history. Swiss newspapers focused on the social aspect of the merger in addition to the economic angle because of the planned job cuts, and for many Basel citizens the mega merger signaled the end of the city as a center of chemistry. Editorial views ran the entire gamut from jubilation to outrage.

    compiled by Goran Mijuk

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    Marc Moret, Daniel Vasella and Alex Krauer at the press conference on March 7, 1996, when the merger of Ciba and Sandoz was announced.

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    Published on 02/03/2021

    Following the merger of Ciba and Sandoz, Novartis was the center of world attention for several days. The Swiss and international press were surprised by the merger, but they quickly recognized its historic significance.

    For example, on the front page of its March 8 edition, the Basler Zeitung wrote: “Yesterday, Sandoz AG Chairman Marc Moret announced the historic decision to merge Ciba and Sandoz at the Crossair headquarters in Basel-Mulhouse Airport. The media interest was enormous and the tension was high.”

    The NZZ went even further and marveled at the added value of the merger. “For once, words like ‘enormous,’ ‘incredible’ and ‘unbelievable’ seem appropriate. Following the announcement of the merger of the two Basel pharmaceutical giants Ciba and Sandoz to form the new colossus Novartis – even the name sounds mythical – the combined market value of the two companies rose by some 18 billion Swiss francs to nearly 100 billion Swiss francs in just a few hours. It is difficult to fully grasp the dimensions of these figures.”

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    At the press conference on December 17, 1996, the company informed the media that the US antitrust authorities had approved the merger.

    A new star

    Investors and analysts were delighted. For example, Jo Walton of Lehman Brothers told Finanz und Wirtschaft that “the merger of the two healthcare divisions would allow for greater concentration … and the breakup of the industrial divisions would result in an increase in value.” Arvind Desai of the New York investment firm Mehta and Islay could barely contain his enthusiasm: “Novartis is a new and rising star with a shining future. The merger of the two companies creates a credible and new concept that other companies will emulate.” He would prove to be right.

    British newspaper The Guardian wrote about other new deals and expected new pharmaceutical giants to materialize following the wave of mergers at the time – Glaxo took over Wellcome and Rhône-Poulenc acquired Fisons. Even Chairman Alex Krauer fanned hopes when, with a view to further acquisitions, he told Reu­ters: “We have to keep our eyes open and be ready if new opportunities present themselves.”

    Breaking a taboo

    It was clear to Marc Moret, who passed away in 2006 and who planned the merger with the Honorary Chairman of Ciba, Louis von Planta, that this “second Basel marriage” would create a huge stir: “Such a collaboration would have been politically unthinkable and culturally unacceptable five years ago,” he told Finanz und Wirtschaft. “But today, at a time when people see that even Switzerland has some problems, it is easier to talk about things that were previously taboo,” he said, adding that “the merger has not only economic consequences, but also political ramifications.”

    Politically correct and unvarnished

    Unlike in the financial world, politicians had an ambivalent attitude toward the jumbo merger, as the Handelszeitung described the deal, because it would result in the loss of some 10 000 jobs worldwide, including 3000 in Switzerland.

    For example, the Federal Council announced that it expected those in charge of the merger “not to place social considerations below pure profit motivations. People have to take priority, even in business matters.”

    The governing council of Canton Basel-Stadt was also concerned about the loss of jobs. But Executive Council member Joerg Schild also saw the merger as a milestone. “The decision to merge is evidence of entrepreneurial spirit and consistent entrepreneurial behavior, which deserve respect and recognition,” he was quoted in the Tages-Anzeiger.

    However, the Tages-Anzeiger also asked what people in the streets of Basel thought. At the Roessli restaurant on Brombacherstrasse they were especially fearful of job cuts and the Roessli guests did not mince their words as they vented their frustration. “It’s downright sickening,” the Tages-Anzeiger quoted one employee. “A few millionaires earn a few million francs overnight with their shares without doing a thing. And the workers lose their jobs.”

    Krauer promised that the job cuts would be carried out in a socially responsible manner, a promise that was kept. Ultimately, Novartis did so well in the following years that the company steadily increased its headcount, and by 2000 it employed more people than it had at the time of the merger.

    Basel as pharmaceutical hub

    For Hans-Peter Platz, editor-in-chief of the Basler Zeitung at the time, the merger was also the beginning of a new era and the final farewell to Basel as a center of chemistry. While Platz did not downplay the fear of job losses, he came to the following conclusion: “The need that multinational companies feel to achieve scale, the case for which can apparently be argued easily and cogently, has to be used here as a commitment to diversification.” This, said Platz, could also attract new innovative companies if Basel, as a nascent pharmaceutical hub, created the corresponding framework conditions.

    Finanz und Wirtschaft saw major opportunities as well. “The mega deal which has earned Switzerland so much respect, especially in the US, will increase the self-confidence of our economy – just in time to counteract the mood taking hold here that the country has no future,” said the editor-in-chief at the time, Peter Bohnenblust, who anticipated that the Novartis deal would “unleash new energy.”

    The assessments by Bohnenblust and Platz would later prove to be correct. The Swiss corporate landscape subsequently changed significantly and Basel became a widely recognized center of innovation and research.

    Innovation

    While Moret and Krauer explained the background of the merger to the media, CEO Daniel Vasella emphasized the importance of innovation from the start.

    In an interview with the Tages-Anzeiger, he said that the merger was not a defensive move and was mainly intended to strengthen innovation: “Innovation is the most important element for us … Size is especially important for research and development, which is becoming more and more expensive.” Of one thing he was convinced: “Novartis will be in the top ranks of innovation.”

    Only a few months later, Novartis launched its antihypertensive medication Diovan®, which became one of the company’s best-selling medicines. A few years later, a medical breakthrough in cancer treatment was achieved with Glivec®.

    Daniel Vasella told Reuters that the company would continue to invest in expanding its pipeline, which is exactly what it did in the following years. Not only did it expand its development of pharmaceuticals, but Novartis also diversified into new areas, such as the generics business, and increased its activities in the area of over-the-counter medications and vaccines.

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    At the Annual General Meeting on April 24, 1996, 98.7 percent of Ciba shareholders approved the merger with Sandoz.

    Two cul­tu­res

    Daniel Vasella also talked about the challenges of merging two companies that were culturally very different. Speaking to The Wall Street Journal, he said the task “is like having a child. Each parent looks for resemblances in the eyes and face. But the child has its own identity. Both sides will need to step back a bit and not impose their own culture on it.”

    Chairman Krauer, too, was aware of how difficult the task was: “For the new management team it is a major challenge to develop a new identity and a new culture,” he told Finanz und Wirtschaft. “It’s a balancing act, taking the good that’s already there and at the same time creating something new.”

    But many people were skeptical. The Economist reminded readers that it had taken years following the merger of Ciba and Geigy in 1970 to create a uniform culture.

    Der Spiegel was particularly harsh in its assessment, as Ciba and Sandoz were seen as very different. “While Ciba has emphasized openness and honesty both internally and outwardly for years, Sandoz is secretive and insincere,” the magazine noted. “At Ciba, all titles have been abolished, the hierarchies are flat, all employees have signing authority in their area … This is not the case at Sandoz. Here, the main principle is one of order and obedience; one of management’s most prominent characteristics is assertiveness and strictness with subordinates.”

    These cultural differences have long been done away with and Novartis has created a performance-oriented company, firmly embedding values such as innovation, quality, collaboration, integrity and courage as distinct cultural pillars within the company.

    Does the name say it all?

    Even the name of the new company was hotly discussed. In an article in the Handels­zeitung, marketing experts were critical of the name that was created: “Novartis? It sounds like a new art gallery or an agency for circus artists,” sneered name specialist Helmuth J. Hoefler of the Phaenomina agency in Kilchberg. “As the name of a chemistry company, it is an absolute disaster.”

    Nor did Hoefler have good things to say about the logo in his conversation with the newspaper: “The logo has the same dullness as the name. The Antiqua font with wide spacing looks traditional, static. And the image element, depicting a flame, is placed apart and somewhat to the left of the lettering. Novartis seems to fit better with an esoteric art publisher than an international corporation.”

    Therefore, Malcolm Parkinson of the agency Siegel + Gale, which developed the name and registered it worldwide, had to elucidate a bit when he talked to The Wall Street Journal: “It’s a synthesized name. From the Latin, ‘novo’ is new and ‘artis’ is skills. So we are suggesting new skills, or innovation.”

    Even the Novartis logo had to be explained. “The new corporate logo, a slender turquoise arrowhead stuck into a bulb-shaped bowl made of one red and one yellow line, is meant to suggest the flower of life, or a mortar as in mortar and pestle,” said Parkinson. “The arrow is to indicate precision because they are in the business of precision. Red and yellow symbolize warmth from the sun as well as the flame of the Bunsen burner used in basic scientific experiments. The whole package,” he declared, “suggests that the merged company will be not only an innovator, but also very much a caring company.”

    Model

    Just a few years after the merger, many of the fears had been forgotten and the name Novartis had come to epitomize innovation and progress.

    “The balance 10 years after Novartis was formed is clear: The group now achieves record profits on a regular basis, has been hiring staff again for years now and has performed better on the stock market than all of its competitors, including the successful Roche,” noted Bilanz in its detailed look back at the decade since the merger.

    When The Economist looked into the question of what made for successful mergers, the influential business magazine cited the merger of Ciba and Sandoz and explained that a key element of successful mergers is not physical proximity of the two companies or the similarity of their operational focus. Rather, it is the fact that the two companies share a common outlook.

    This was already clear on March 7, 1996, when Alex Krauer said: “In a period of rapid change, it is not enough to be good. Only the best will be successful. Novartis is an expression of this will.” That is still true today.

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