Novartis, the giant Swiss drug maker, announced in a press release dated December 15, 2010 that it had reached an agreement with Alcon, the eye-care company, wrapping up a yearlong effort to buy the 23 percent of Alcon it does not already own. Novartis will use its stock to pay the equivalent of $168 for each Alcon share, valuing the transaction at $12.9 billion. The new division had generated $8.7 billion in annual sales last year.
Novartis said it expected the deal to close in the first half of next year, pending shareholder approval, adding that it foresaw annual cost synergies of $300 million with full ownership.
Novartis had announced in January that it planned to acquire Alcon, first buying Nestlé’s 77 percent share in the company, but stumbling in its attempt to obtain the stock of minority shareholders, for which it had offered a lesser price. Alcon directors held up the full merger, saying the bid was “grossly inadequate” and objecting to what they called Novartis’s “coercive action.”
The drug maker bought into Alcon in three main stages, first purchasing $10.4 billion worth of Alcon shares from Nestlé for $143 a piece in 2008; then buying out the rest of the food company’s interest for $28.1 billion this year, at $180 a share. The average share price of the two transactions was $168, the same deal it is now offering minority shareholders. Altogether, the cost for Novartis comes to $51.6 billion, including a cash supplement of up to $900 million.
Novartis was able to sweeten the deal with the help of exchange rates, as the Swiss franc strengthened against the dollar and as its stock went up. It is offering 2.8 of its own shares for each Alcon share.The drug maker will offset the dilutive effects of the 108 million new shares being issued with a share buyback program.
Kevin Buehler, president and chief executive of Alcon, will lead the division when it is merged with Novartis. Alcon was advised by the law firms Cravath, Swaine & Moore and Homburger, while the independent directors were advised by Sullivan & Cromwell and Pestalozzi, Zurich.
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