Novartis Buys Rest of Alcon for $12.9 Billion

Novartis Buys Rest of Alcon for $12.9 Billion

Novartis AG Wednesday paved the way to take full ownership of Alcon Inc. after sweetening its original share offer with a cash component, ending a drawn-out battle to acquire the remaining 23% of the U.S. eye-care company in a deal worth $12.9 billion.

The full acquisition—intended to help Novartis capitalize on an eye-care market that is expected to grow faster than pharmaceuticals in coming years—will now cost Novartis about $51.6 billion, making it Switzerland's biggest takeover so far and one of the biggest ever in the industry.

Under the new agreement, Novartis will guarantee minority shareholders $168 per share. The number of Novartis shares it's offering hasn't changed, and still stands at 2.8. When the offer to the public shareholders was made at the beginning of the year, it was valued at about $153 per share, but Novartis stock has risen since then. The new $168-a-share offer equals the average of what Novartis previously paid Nestle SA for two chunks of Alcon totaling 77% of the company. Novartis paid Nestle $38.7 billion in total.

Novartis said it will add cash if necessary to guarantee a value of $168 per share should its stock drop. If the value of 2.8 Novartis shares is more than $168, then the number of Novartis shares will be reduced accordingly. When Novartis made its initial bid to minority shareholders, they rejected it as too low.

Minority shareholders meanwhile pressed Novartis to provide them with some sort of cash buffer that would help shield them if Novartis's share price were to fall in value.

Alcon's independent board of directors, which backs the new deal, had previously threatened possible litigation and had opened a $50 million trust to finance potential lawsuits.

"With this step Novartis takes full ownership, becoming the global leader in eye care, a rapidly expanding, innovative platform based on the growing needs of an aging population," Novartis chairman Daniel Vasella said in a statement.

The full buyout reflects Novartis's drive to broaden its product portfolio and help it tap the growing eye-care market. Alcon's inclusion will add about $6.5 billion in additional sales to Novartis, which last year had revenue of about $44 billion. The buyout should also help the Swiss company mitigate a steep sales drop from lost patent protection for its two biggest medicines, heart drug Diovan and cancer drug Glivec.

Novartis predicts that fully acquiring Alcon will help it create annual synergies of about $300 million, up from $200 million that would have resulted from a partial acquisition. Also, owning only 77% of the company would have forced it to run Alcon at arm's length.

Novartis shares traded 6.6% higher in Zurich on Wednesday, up 3.20 Swiss francs at 56.80 francs—still valuing the stock portion of the bid at marginally below the guaranteed value. Shares of Alcon had closed at $162.43 on the New York Stock Exchange Tuesday and are likely to move toward $168 on Wednesday.