Novartis buys 25-percent stake in Alcon
Swiss pharmaceutical maker is buying one-quarter of the eye-care company, with an option on a further 52 percent stake in a deal potentially worth CHF 39.5 billion.7 April 2008
GENEVA - Swiss pharmaceutical maker Novartis AG said Monday it is buying one-quarter of the eye-care company Alcon Inc., with an option on a further 52 percent stake in a deal potentially worth CHF 39.5 billion (USD 39 billion).
The Alcon deal, which still requires regulatory approval, would be one of the largest in Swiss history.
Novartis will initially pay food and beverages giant Nestle SA CHF 11.1 billion (USD 11 billion) for a 25 percent share of the Texas-based producer of lenses and solutions.
In a second step, Novartis has the exclusive right to buy Nestle's remaining 52 percent stake in Alcon for about CHF 28.4 billion (USD 28 billion) between January 2010 and July 2011.
While the second step is optional, both companies would have to agree not to exercise their rights for it to fall through.
"It is quite clear in the minds of the people and the companies who signed the contract that we expect this to go through," Nestle spokesman Francois-Xavier Perroud told The Associated Press.
"However, the deal is not definitive until it's consummated."
Nestle chairman and chief executive Peter Brabeck-Letmathe said the deal was good for his company's shareholders and would give Alcon a new minority shareholder "whose activities are closely aligned with its own business."
Brabeck-Letmathe is due to hand over the CEO role to Paul Bulcke, who currently heads Nestle's business in the Americas, on Thursday.
The Vevey, Switzerland-based owner of brands such as Nescafe, Perrier and Dreyer's has been spinning off its non-food business in recent years, while expanding its footprint in the areas of nutrition, health and wellness.
Last year, Nestle bought the medical nutrition and Gerber baby foods units of Novartis for about CHF 8.1 billion (USD 8 billion).
"These three deals are not connected, but they show that companies concentrate on what their real field of competence is. In our case it's clearly food and nutrition, and in Novartis' case it's pharmaceuticals," said Perroud.
Nestle said it would use the proceeds from the sale of its Alcon shares to reduce debt, buy back more of its own shares and support acquisitions in line with its focus on food, diet and lifestyle products.
Alcon Inc., which makes Opti-Free contact lens solution and Systane eye drops along with surgical equipment and implantable lenses, has 14,500 employees worldwide.
Nestle spokesman Perroud said the deal will not lead to job cuts.
Alcon recently reported full-year profits of CHF 1.6 billion (USD 1.6 billion) for 2007. Turnover last year reached CHF 5.7 billion (USD 5.6 billion).
Novartis chief executive Daniel Vasella said his company would borrow CHF 5.6 billion (USD 5.5 billion) to finance the deal, with the remainder coming out of its own reserves.
"Eye care will continue to grow dynamically as there is a growing unmet medical need driven primarily by the world's aging population," Vasella said in a statement.
He said the purchase if Alcon was in line with the Novartis strategy of focusing on high-growth segments of the health care market.
Alcon is regarded as less exposed to potential litigation from eye surgery patients than some of its rivals because it does not do much in the field of laser eye surgery.
Novartis shares were down 1.9 percent on the Zurich exchange at CHF 51.40. Shares in Nestle rose 2.4 percent to CHF 524.00.
[AP / Expatica]