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By Mike Caggeso
Swiss pharmaceutical kingpin Novartis AG (NVS) has agreed to buy Nestle SA's (PINK: NSRGF) 77% stake in U.S. eye care company Alcon, Inc. (ACL) – a deal reportedly worth up to $39 billion, Novartis said in a statement.
Novartis will first acquire a 25% stake from Nestlé for $143.18 per share (about $11 billion), by the second half of this year.
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In the optional second step, it can acquire the remaining 52% for a fixed price of $181 per share (about $28 billion) between January 2010 and July 2011. Nestle has the right to require Novartis to buy its remaining Alcon stake.
Following completion of the transaction's first step, Novartis will have a representative on Alcon's Board of Directors. Alcon and Novartis will remain separate and independent companies.
The acquisition will add the world's eye care leader to Novartis' portfolio, much of which is focused on prescription drugs that are facing increased competition from generic drug manufacturers. Alcon's eye care products range includes surgical, pharmaceutical and consumer products.
"This acquisition furthers our strategy of accessing high-growth segments of the healthcare market while balancing inherent risks. The strategic fit of Alcon and Novartis is excellent with our complementary product portfolios and R&D synergies. Eye care will continue to grow dynamically as there is a growing unmet medical need driven primarily by the world's aging population," Dr. Daniel Vasella, Chairman and CEO of Novartis,.
For Nestle, the deal will give the world's largest food group a big chuck of capital for acquisitions and streamline its holdings.
"We consider Nestle's move as a positive step in its transformation into a 'health, wellness and nutrition' company," Claudia Lenz, a Vontobel Holding AG analyst, told Reuters. "Moreover, the reduction in net debt gives Nestle scope for further share buyback programs."
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Novartis to buy Nestle's Alcon stake for $39 billion