Novartis expands ophthalmics franchise with 25% stake in Alcon, plus more later

Pharmaceutical major Novartis has entered into an agreement with fellow Switzerland-based food giant Nestle to acquire 74 million, or around 25%, of the outstanding shares of its majority-owned subsidiary Alcon, at a price of $143.18 each, for a total of about $11.0 billion.

The food group would retain 52% of Alcon but, under put and call option rights, which commence on January 1, 2010 and end July 31, 2011, Novartis can buy the remaining Nestle holding at a fixed cost of $181 a share, or a 20.5% premium to the then prevailing market price, for a total of some $28.0 billion. The two firms are already well-versed in buying from each other, since the drugmaker last year sold both its Novartis Medical Nutrition and Gerber baby foods businesses to Nestle for a total of around $8.0 billion and its Novartis Nutrition operation for $2.5 billion in 2006.

Alcon, incorporated in Switzerland but with the majority of its operations in the USA, recorded sales of about $5.6 billion in 2007, with operating income at $1.9 billion. Within this, Alcon had surgical product turnover of $2.5 billion, with a 48% share of the eye surgery market, and is leader in the cataract and vitroretinal segments. Pharmaceuticals, notably ophthalmic allergy and anti-infective agents, generated revenues of some $2.3 billion, while its consumer segment achieved sales of $800.0 million, including from lens care products.