Novartis acquires 25 percent of Alcon from Nestle; mulls 52 percent more

4/7/2008

BASEL, Switzerland Novartis on Monday announced the acquisition of up to 77 percent in the eye care company Alcon, giving the company majority ownership in a deal that could be worth as much as $39 billion by the time its done.

“This acquisition furthers our strategy of accessing high-growth segments of the healthcare market while balancing inherent risks,” stated Novartis chairman and chief executive officer Daniel Vasella. “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.”

The agreement comes in two steps. First, Novartis will acquire a 25 percent stake in Alcon from Nestle for $143.18 per share, or approximately $11 billion, with closing expected in the second half of 2008. In an optional second step, Novartis has exclusive right to acquire Nestle’s remaining 52 percent stake for a fixed price of $181 per share between January 2010 and July 2011, a transaction that would total approximately $28 billion. According to the agreement, Nestle has the right to require Novartis to buy this stake.

Alcon is a world leader in eye care with its pharmaceutical, surgical and consumer eye care products, and boasts a robust development pipeline, Novartis stated, citing the company’s strong strategic fit with Novartis’ own contact lens and ophtha pharmaceutical businesses.

Alcon recorded 2007 annual sales of $5.6 billion, operating income of $1.9 billion and net income of $1.6 billion. Specifically, Alcon recorded surgical sales (medical devices and products for ophthalmic surgery) of $2.5 billion in 2007, representing an increase of 13 percent. Pharmaceutical sales totaled $2.3 billion, up 15 percent, while consumer sales, which includes the Opti-Freee line of contact lens care products, over-the-counter eye drops and ocular vitamins, climbed 15 percent to $800 million.

Under the terms of the transaction, Cary Rayment, who has been with Alcon since 1989 will remain as chairman, president and chief executive officer of Alcon.

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