NOVARTIS Buys Alcon Eye Care Paying $40 Billion

Submitted by SadInAmerica on Mon, 01/04/2010 - 6:25pm.

Novartis International, the Swiss pharmaceuticals group, chose the first day of trading in the new year to launch one of Europe's biggest ever takeovers, a $40 billion (£24.8 billion) offer for Alcon, a leading maker of eye care products and contact lense solutions.

Novartis bought 25 per cent of Alcon, which is also based in Switzerland, in April 2008 for $10.4 billion and is now exercising its option to buy another 52 per cent of the company for $28.1 billion from its owner, Nestlé.

Novartis is proposing to buy out the minority 23 per cent of Alcon shares with an issue of new Novartis shares worth $11.2 billion.

Novartis paid $143 a share for its initial stake in April and is buying the other 52 per cent for $180 a share, while its share offer for the minority remaining stake of 2.8 Novartis shares for each Alcon share, values Alcon's shares at $137.

As well as contact lenses solutions, Alcon is the world's biggest producer of medical devices for cataract and other eye surgery including artificial lenses. It also makes eye drop medicine for glaucoma and eye allergies.

Novartis makes contact lenses through its CIBA Vision division but not lense solution.

Daniel Vasella, the chairman and chief executive of Novartis said: "The addition of Alcon will strategically strengthen our healthcare portfolio and our position in eye care, a sector with dynamic growth due to the increasing patient needs of an ageing population.

"This is the right time to simplify Alcon's ownership to eliminate uncertainties for employees and shareholders. It will also allow us to strengthen innovation power by combining R&D efforts and grow our global market presence thanks to our complementary product portfolios."

Together Alcon and Novartis will provide products that cover 70 per cent of the global eye care sector.

With a 77 per cent stake, Novartis believes that it can generate $200 million in cost savings within three years,

It said that achieving 100 per cent ownership would allow it to achieve another $100 million of cost savings and "avoid speculation about the minority stake and enable the companies to move faster to achieve the full potential of the combined businesses".

There has been speculation that Nestlé will use some of the $28.1 billion proceeds from the Alcon sale for acquisitions, including a possible bid for Cadbury, the British confectionery group that is subject to a £10.3 billion hostile bid by Kraft of the US.

Today, Nestlé said that it would launch a new SwFr10 billion (£6 billion) share buyback programme for two years once its existing SwFr25 billion programme is completed this year.

Warren Ackerman, analyst at Evolution Securities, said: "Nestlé still have plenty of firepower to do sizeable acquisitions despite their comments that this is not on the agenda. Given the relatively conservative buyback, Nestle could well be keeping their powder dry to get involved in Cadbury (probably alongside Hershey)."

Robert Lyndsay - January 4, 2010 - source TimesOnlineUK

Tag this page!
Submitted by SadInAmerica on Mon, 01/04/2010 - 6:25pm.