Hour after Novartis launched a bid to gain full control of Alcon, an independent committee of directors at the eye care specialist have criticised the Swiss major’s actions.
Novartis is purchasing the remaining shares in Alcon owned by Nestle for $180 per share in cash, which will give it a 77% holding, having bought a 25% stake in its fellow Swiss firm in 2008. However the controversy arises over the Basel-based giant’s plans to buy out the 23% stake in Alcon held by minority shareholders.
The latter will receive 2.80 Novartis shares for each Alcon share they hold, valued at $153 per share, well down on the amount Nestle is getting. This has led to the committee studying the offer coming out and saying that it is disappointed that Novartis is attempting to circumvent “protections and corporate governance best practices”. The committee added that it believed Alcon had previously established certain protections for its minority shareholders against a takeover bid of this sort.
However, the directors say Novartis is prepared to take advantage of Swiss law which would allow it to force through a takeover once it takes majority control from Nestle. Novartis has suggested it will “simply wait until it owned 77% of Alcon to then unilaterally impose the terms of the proposed merger on the minority shareholders”, says the committee.
They add that “such a unilateral action would clearly be inconsistent with the minority protection principles upon which Alcon established itself and Alcon shareholders rely”. There is no sign from Novartis yet that it intends to sweeten its offer and a legal challenge may be the only option open to minority shareholders.
The takeover of Alcon is going down well with analysts, however, and IHS Global Insight analyst Zulaikha Sesay says that the combination will see Novartis control up to 70% of the total eyecare market. If the full acquisition deal goes through, Novartis will have shelled out a total of $50.3 billion, she notes, making it one of the largest mergers in recent times, comparable to the $46.8 billion Roche/Genentech deal.
