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Årets første MEGA M&A

24044 akademikeren 4/1 2010 21:12

The Swiss pharmaceutical giant (CH:NOVN 55.05, -1.45, -2.57%) (NVS 52.50, -1.93, -3.55%) , which bought 25% of Alcon (ACL 156.00, -8.35, -5.08%) from Nestle (NSRG.Y 49.57, +1.22, +2.52%) (CH:NESN 50.88, +0.28, +0.54%) in April 2008, said that it's exercised a call option to buy Nestle's remaining 52% stake for $28.1 billion, or $180 a share.

Once that deal has been completed, Novartis plans to push through the acquisition of the remaining 23% of the stock, which is publicly traded, in a share-swap deal valued at $11.2 billion.

The offer to minority shareholders is worth $153 a share -- a price likely to get a cold reaction from the remaining investors in that Switzerland-based Alcon's shares closed last Thursday at $164.35.

Daniel Vasella, chief executive of Novartis, told analysts that the difference reflects the fact that it's paying extra to Nestle for control of the company.

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The latest deal between Novartis and Nestle is expected to close in the second half of 2010. Once that side of the deal is completed, Novartis will go ahead with its plan to swap each remaining Alcon share for 2.8 of its own shares.

Unlikely to see higher bid

Alcon's U.S.-listed shares dropped nearly 5% to $156.97 in afternoon trading, while Novartis shares lost 3% to $52.81.

Analysts attributed the decline in Alcon shares to the low bid for the publicly held shares, noting that the stockholders may not have much clout in wrestling a higher price.

"It appears that Novartis has the upper hand due to unique circumstances related to Swiss merger law," wrote Bernstein Research analyst Tim Anderson in a note to clients early Monday.

"Once it owns 77% of Alcon, it appears that Novartis can 'force' through the rest of the transaction, leaving non-Novartis minority shareholders in Alcon without much power. This implies that the $153 below-market price Novartis is offering is likely to stand," Anderson continued.

"There may be some recourse ... such as filing a legal complaint with the courts after the deal closes disputing the price that Novartis is offering, but at first blush the odds of this being successful appear low," Anderson added.

Evolution Securities analyst Warren Ackerman said that Novartis had been expected to take up its option on Nestle's stake early in 2010, but added it was a positive sign that it the deal was announced earlier than expected.

He added, however, that minority shareholders "will no doubt be very unhappy with these terms."

Alcon said that a committee of independent directors is reviewing the Novartis proposal. In a statement, the company also highlighted the significant difference between the offer and the price Novartis will pay Nestle.

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