Business Times

Novartis wins Alcon with cash sweetener

By Katie Reid

ZURICH (Reuters) - Novartis AG wrapped up its long-awaited buyout of the remainder of U.S.-listed eyecare group Alcon Inc for $12.9 billion, after sweetening its original offer with cash. The Swiss drugmaker is hoping the Alcon deal, worth some $52 billion in total, will help it diversify and give it protection against patent losses on big-selling medicines such as blood pressure drug Diovan.
Novartis has been trying to clinch 100 % ownership of Alcon since the start of the year, but its original all-paper offer of 2.8 shares for each Alcon share met stiff resistance from Alcon's Independent Director Committee (IDC), which repeatedly dismisse it as "grossly inadequate."

The merger consideration will now include up to 2.8 Novartis shares and will be topped up, if necessary, with cash to ensure Alcon shareholders receive $168 per share, the average price Novartis paid earlier this year for Nestle's 77 percent stake in Alcon.

The Basel-based group said that if the value of 2.8 Novartis shares is more than $168, the number of Novartis shares will be reduced accordingly. "The overhang of the Alcon acquisition has been the key restraint on the Novartis share price in 2010," said Deutsche Bank analyst Tim Race. "With improved visibility now available and the share buyback soaking up the dilution, we expect Novartis shares to outperform."

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

Novartis' move completes the final stage of a lengthy process to get full control of Alcon, known for its contact lens solutions but also the dominant player in the multibillion-dollar market for intraocular lenses, small lenses implanted in the eye to correct problems focusing.

Alcon is also No. 1 in cataracts, an area that is set to expand due to aging populations. It also makes contact lenses and other eyecare products. It competes with Abbott Laboratories' Advanced Medical Optics, Bausch & Lomb, which was bought by private equity firm Warburg Pincus in late 2007 for $4.5 billion, and Cooper Cos, whose stock hit a four-year high on Wednesday.

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