Market Updates

Novartis Offers $39.3 Billion for Alcon Stake

123jump.com Staff
04 Jan, 2010
New York City

    Novartis agreed to acquire Alcon Inc for additional $39.3 billion. The Swiss pharmaceutical giant will pay $28.1 billion to gain 52% stake from Nestle and $11.2 billion to minority share holders. The two-tier price offered by Novartis may not go well with independent directors at Alcon.

[R]10:35 AM New York - Novartis agreed to acquire Alcon Inc for additional $39.3 billion. The Swiss pharmaceutical giant will pay $28.1 billion to gain 52% stake from Nestle and $11.2 billion to minority share holders.[/R]

Novartis AG agreed to acquire majority stake held by Nestle SA in Alcon Inc. Novartis said it will pay premium to acquire the majority stake from Nestle and pay a lower price to minority shareholders meeting the Swiss takeover rules.

The deal culminates after nearly two years when Novartis acquired an option in Alcon. According to the proposal Novartis will pay $49.5 billion of which $28.1 billion will be paid to Nestle and the rest to minority shareholders.

Novartis will pay $180 a share in cash to Nestle and will fund the deal with a debt of $16 billion and the rest from its cash holdings.

The Swiss drug giant also offered 2.8 Novartis shares for each share of Alcon held by minority shareholders. That values the shares at $153 each, lower than $164 price in the recent trading.

Alcon independent directors are reviewing the offer and the company noted in a press statement that the 15% discount to the price paid to Nestle shareholders.

Novartis will pay $28.1 billion to Nestle and $11.2 billion to minority shareholders and acquired its initial stake at $10.4 billion.

Alcon sells several products related to eye treatment and surgery and generates 46% of its revenues from sales related to eye surgery. Total sales in 2008 were $6.3 billion and operating income of $2.2 billion.

Novartis expects to save $200 million a year before taxes if it acquired only 77% of Alcon and additional $100 million if it gained full control of the company. The company earnings will be 9% lower because of new shares issued to complete the acquisition.

Novartis plans to issue 98 million new shares and use 117 million shares in its treasury to fund the acquisition. Nestle will use the proceeds to buy back its shares fueling speculation that it may not bid for Cadbury Plc.

Nestle acquired Alcon in 1977 for $280 million according to spokeswoman Nina Backes.

In New York trading, Alcon ((ACL)) declined 2.9% or $4.81 to $159.51 and Nestle SA ((NSRGY)) increased 2% to $49.35.

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