Novartis to acquire 40 bln dollar eye care company ‘Alcon’

GENEVA - Swiss pharmaceutical group Novartis on Monday laid the ground for a near 40 billion dollar (25.5 billion euros) takeover of the world’s biggest eye care company Alcon from food giant Nestle in a bid to boost its healthcare portfolio.

Nestle, also based in Switzerland, said it would use the funds from the sale to support opportunities for growth as it seeks to expand in the nutrition, health and wellness areas. Under the deal, Novartis will acquire about 24.85 percent of Alcon for about 11 billion dollars (7.0 billion euros). In addition, it has an option valid from January 2010 until July 2011 to acquire Nestle’s remaining majority stake of about 52 percent in Alcon for around 28 billion dollars (17.9 billion euros). The remaining stock of Alcon is traded on the New York Stock Exchange.

Novartis said the complete deal would “further strengthen its healthcare-focused business portfolio.” It also enhances the group’s “longer-term growth prospects with greater access to the faster-growing eye-care market, a speciality field with unmet patient needs and annual sales of about 25 billion dollars in 2007.”

In 2007, Alcon generated annual sales of 5.6 billion dollars and net profit of 1.6 billion dollars.

“This acquisition furthers our strategy of accessing high-growth segments of the healthcare market while balancing inherent risks,” said Novartis chairman and chief executive Daniel Vasella. He noted that Alcon and Novartis have an “excellent” strategic fit with their product portfolios.

Alcon’s speciality in eye care extends to surgical, pharmaceutical and consumer products, and Novartis sees areas of development including a broader portfolio of eye care products, in particular with CIBA Vision’s contact lens business and Novartis’ Lucentis, a medication for severe eye diseases. “Other opportunities include R&D (research and development) activities and an even more aggressive expansion in fast-growing regions, particularly Asia, where Novartis has long-standing operations,” said the pharma group.

Nestle chairman and chief executive Peter Brabeck-Letmathe said the sale “reflects Nestle’s commitment to ensure a strategically sound and financially attractive solution for Nestle and Alcon. “Nestle has been able to take a further step in realising shareholder value from its long-term Alcon investment.”

Credit Suisse analyst Olivier Mueller said the transaction was “positive” for Nestle as it continued to sharpen its focus on its food and beverages business.

Another Credit Suisse analyst Thomas Kaufmann noted that Alcon’s business was also a good fit with Novartis’ portfolio.

Nestle shares rose 1.9 percent to 528.50 Swiss francs in afternoon trade, while Novartis fell 2.5 percent to 51.10 Swiss francs. The overall market was up 1.0 percent.

Nestle and Novartis are no strangers in major deals. In 2006 Novartis sold a medical nutrition business to Nestle for 2.5 billion dollars.

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