Eye care company Alcon, Inc. (ACL) announced that its Independent Director Committee recently responded to Novartis AG’s (NVS) proposal to acquire its minority publicly traded shares. The Committee referred to the proposal as “grossly inadequate” and “fundamentally flawed”.

Earlier this month, Novartis had announced that it intends to gain full ownership of Alcon. Novartis will initially complete its April 2008 agreement with Nestlé S.A. whereby it will acquire a majority stake (77%) in Alcon. Of this, the company has already acquired a 25% stake in 2008 for $10.4 billion.

Novartis will be paying $28.1 billion for Nestlé’s remaining 52% stake in Alcon. Once this deal is completed in the second half of the year, Novartis is planning to acquire the remaining 23% minority stake. Each Alcon share will receive 2.8 shares of Novartis.

As of January 19, 2010, the proposal is valued at $151.43 per Alcon share, well below the $180 in cash that will be paid by Novartis to acquire its majority position. In fact, Alcon shares are currently trading at $154.88, which is again above the offer price. The Committee stated that it will evaluate and take appropriate action to ensure that the rights of the minority shareholders are protected.

The acquisition of Alcon will help Novartis diversify and make up for revenues lost to generic competition. Moreover, it will help the company strengthen its position in the eye care market, which presents significant growth potential thanks to the unmet needs of the aging population. We believe that Novartis will most likely come back with a revised offer price.

We currently have a Neutral recommendation on Alcon. We believe the company’s business model remains fundamentally strong. The company has also done an excellent job with cost-control which should continue to benefit operating margins. Meanwhile, continued international penetration, new product launches and market share gains will be the fuel for future revenue growth.

Zacks Investment Research

1. (ACL) Alcon Strengthens Product PipelineAlcon, Inc. (ACL) continues to work on expanding its product portfolio. The company recently entered...
2. (NVS) Novartis Collaborates with GenVec on Hearing Loss TreatmentsRecently, Novartis (NVS) entered into a collaboration with GenVec (GNVC) for the development of treatments...
3. (PFE) Novartis Sees Profits In Alcon – Why You Should TooTony Daltorio, Investment U Research Tuesday, January 12, 2010 Back in October, I wrote about...
4. (NVS) Novartis Announces Intent to Gain Full Ownership of AlconNovartis (NVS) has recently announced that it intends to gain full ownership of eye care...
5. (ACL) Alcon Continues to Grow PipelineAlcon, Inc. (ACL) recently entered into an in-licensing agreement with Potentia Pharmaceuticals, a privately-held biotechnology...
6. (ACL) Alcon Aquires Swiss Company and Expands PipelineEarlier this week, Alcon Inc. (ACL) signed a definitive agreement for the acquisition of Swiss...

Search Posts by Tag: ACL | Alcon Inc | Novartis AG | NVS | Healthcare

RSS Feeds by Tag: ACL | Alcon Inc | Novartis AG | NVS | Healthcare |

Other Posts by: vitalstocks | RSS Feed for this author