Novartis AG will take full control of Alcon, the world’s largest eye-care company, after agreeing to pay $12.9 billion for the stock it doesn’t own to end an 11-month dispute with minority shareholders.
Novartis rose the most in more than two years in Zurich trading after saying it will buy back shares to offset the issuance of stock. The payment will be a combination of Novartis stock and, if necessary, cash to bring the value of the bid to $168 a share, the Basel, Switzerland-based company said today in a statement. Alcon’s independent directors recommended approval. Novartis’s initial offer in January valued Alcon shares at $153.
Alcon will become the eye-care division of Novartis, which will also include CIBA Vision contact lenses and eye medicines. The unit would have had sales of $8.7 billion last year. Novartis CEO Joseph Jimenez is looking to Alcon to help the Swiss company diversify away from pharmaceuticals, a model also pursued by New Brunswick, New Jersey-based Johnson & Johnson, which sells prescription drugs, medical devices and consumer products such as the Tylenol painkiller.
“This is very good,” Andrew Weiss, an analyst at Bank Vontobel in Zurich, said in a telephone interview today. “Both parties have buried the hatchet and can move on to the daily agenda.”
Share buyback
Novartis said it plans to restart a 10 billion-Swiss franc ($10.4 billion) share buyback programme first announced in 2008. The company will issue about 108 million shares to be used for the merger. Assuming a cash payment of about $900 million and a share buyback of $5 billion, the deal is expected to reduce diluted earnings per share by 3 per cent, Novartis said.
Novartis rose 4.30 francs, or 8 per cent, to 57.90 francs at 2.35 pm in Zurich trading. The stock climbed as much as 8.9 per cent, the biggest intraday advance since October 17, 2008. Alcon rose $1.71, or 1.1 per cent, to close at $162.43 yesterday in New York Stock Exchange composite trading.
The purchase values Alcon at about 25 times net income, compared with an average multiple of 26 for past eye-care acquisitions, according to data compiled by Bloomberg. Based on the new terms, the Swiss company will have paid a total of about $51.6 billion for Alcon.