Novartis sweetens deal to win full Alcon ownership

Novartis sweetens deal to win full Alcon ownership

Zurich: Novartis AG has wrapped up its long-awaited buyout of the remainder of US-listed Alcon it didn’t own for $12.9 billion, after sweetening its original offer with a cash element.

The Swiss drugmaker has been trying to clinch 100% ownership in Alcon since the start of the year, but its original all-paper offer of 2.8 Novartis shares for each Alcon share met stiff resistance from Alcon’s Independent Director Committee (IDC), which repeatedly dismissed it as “grossly inadequate".

The merger consideration will now include up to 2.8 Novartis shares and, if necessary, be topped up with cash to ensure that each Alcon shareholder gets $168 per Alcon share, Novartis said on Wednesday.

The group added that if the value of 2.8 Novartis shares is more than $168, the number of Novartis shares will be reduced accordingly and that a share buyback programme would be started again to minimise dilution to Novartis shareholders.

The move completes the final stage of a lengthy process to get full control of the eyecare group, which is the dominant player in the multibillion-dollar intraocular lens market and is also No. 1 in cataracts -- an area that is set to benefit from ageing populations.

“The announcement ... removes uncertainty around this transaction which has weighed heavily on the Novartis share price in recent months. This together with the re-activation of the share buyback programme should support the Novartis share price," Helvea analyst Karl-Heinz Koch said.

Novartis shares were indicated to open over 1% higher, according to data provided by bank Clariden Leu.

Global eyecare leader

“With this step Novartis takes full ownership, becoming the global leader in eyecare, a rapidly expanding, innovative platform based on the growing needs of an aging population," Novartis chairman Daniel Vasella said in a statement.

The Basel-based group is hoping the Alcon deal, worth $51.6 billion in total, will help it diversify and protect it against patent loss on big selling medicines such as blood pressure drug Diovan.

Novartis earlier this year completed its buy of a 77 percent stake from Nestle and paid the Swiss foods group on average $168 per Alcon share.

But the drugmaker refused to budge from its offer made to the remaining Alcon shareholders, which throughout the year this was worth less than the average price paid to Nestle and at Tuesday’s closing price was worth $156.

Novartis argued it would be able to push the deal through under Swiss merger law, but Alcon’s IDC still threatened to fight Novartis in the courtrooms to get a fair price.

Novartis said its board of directors had unanimously approved the merger and it was likely to be completed during the first half of 2011.

It is, however, conditional on clearance of a registration statement by the US Securities and Exchange Commission, two-thirds approval by the shareholders of each of Novartis and Alcon voting at their respective meetings, and other customary closing conditions.