Novartis Acts To Acquire Alcon

Novartis intends to complete its acquisition of Alcon. It will do so by first purchasing a 52% stake currently owned by Nestlé. It will then buy what remains of Alcon on the stock market. In total, Novartis will have spent $49.7 billion to take over the ophthalmic products firm.

The Swiss drug giant paid Nestlé $10.4 billion in 2008 for a 25% stake in Alcon. It is now exercising an option under that agreement to purchase Nestlé’s remaining stake in Alcon for $28.1 billion, or $180.00 per share. Novartis then plans to spend $11.2 billion for the 23% of the company in publicly owned shares.

Nestlé purchased Alcon, which was based in Fort Worth, Texas, in 1977 for $280 million. It later floated part of it on the stock market. In 2008, Alcon had $6.3 billion in sales divided among surgical products (46%), pharmaceuticals (41%), and consumer products such as eye drops (13%).

The deal is the most recent move by a large pharmaceutical firm to supplement income from traditional prescription drugs by acquiring over-the-counter, generic, or specialty health care businesses. Last month, for example, Sanofi-Aventis announced plans to acquire Chattem, a U.S.-based consumer health care firm, for $1.9 billion (C&EN, Jan. 4, page 11).

“The addition of Alcon will strategically strengthen our health care portfolio and our position in eye care, a sector with dynamic growth due to the increasing patient needs of an aging population,” says Novartis CEO Daniel Vasella.

Vasella adds that the acquisition will combine Alcon’s research and marketing assets with Novartis’ Ciba Vision eye-care business, which specializes in contact lenses. Novartis estimates that the combined business will have annual sales of about $8.5 billion and cover 70% of the global vision-care market.

Eric Le Berrigaud, a stock analyst with Raymond James, in Paris, says Novartis’ acquisition can be viewed as part of a significant restructuring of its overall business that would justify the high price it is paying. “This is an expensive deal,” he says. “But Novartis is not only looking to offset patent expiry; it is looking to build a new Novartis for the next decade.”