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Jan 20, 2010

Alcon Concludes Novartis’ $11.2B Acquisition Bid Is Grossly Inadequate

  • Alcon’s independent director committee has dismissed Novartis’ recent proposal to acquire, through a compulsory merger transaction, the final 23% of the eyecare company at a price of 2.8 Novartis shares per Alcon share. Calling the offer grossly inadequate, the Alcon committee further claims that in its push to acquire the minority publicly traded shares in Alcon, Novartis has deployed “coercive tactics” that are “offensive and demonstrate profound disrespect for Alcon’s minority shareholders.”

    Novartis already has a guaranteed 77% stake in Alcon, which was purchased from Nestlé in two stages. In April 2008, Novartis paid Nestlé $10.4 billion for a 25% slice of Alcon. Then on January 4, 2010, Novartis exercised its option to purchase Nestlé’s remaining 52% stake in Alcon for $28.1 billion (about $180 per Alcon share) in cash.

    Novartis’ 2.8:1 offer for the remaining 23% of publicly traded Alcon stock equates to $151.43 per Alcon share. The Alcon committee stresses this is well below the $180 in cash Novartis is paying to acquire its majority stake from Nestlé.

    It also suggests that the financial analysis on which Novartis’ unilateral proposal was based is fundamentally flawed. “Novartis has dramatically understated Alcon’s unaffected share price, and the premium that should be applied to such share price is significantly higher than the 12% proposed by Novartis,” the committee concludes.

    Alcon says that these conclusions have been reached following a careful review of the terms and financial aspects of Novartis’ proposal along with an evaluation of Alcon’s past and anticipated financial performance, growth prospects, and merger-synergy opportunities.

    “The committee will evaluate and take all appropriate and available steps to ensure that the rights of Alcon’s minority shareholders are not trampled on in the manner proposed by Novartis,” asserts committee chairman, Thomas G Plaskett.


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