Novartis AG said on Thursday it would sell its nearly one-third voting stake in Roche back to its cross-town rival for $20.7 billion, disentangling the two pharma companies that had been linked by the investment for two decades.

The deal extricates Roche from ownership ties to a major competitor with strategic vetoing power, though it has kept a passive role in the face of powerful Roche family shareholders.

The transaction sent Roche shares to a record high. By mid-morning, they were up 2.4 per cent, while Novartis shares were up 0.2 per cent.

Novartis has agreed to sell 53.3 million Roche bearer shares for $388.99 (356.93 Swiss francs) per share, a price that reflects the volume-weighted average of the Roche non-voting equity certificates over the 20 trading days to Nov. 2, Novartis said in a statement.

In a separate statement, Roche said it will use debt to finance what it called a "disentanglement of two competitors" and plans to reduce its capital by cancelling the repurchased shares to regain full strategic flexibility.