Novartis Shifts Sights to Eye Care Giant Alcon with $50 Billion Buyout Plan

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Starting off the New Year with a bang, Swiss drugmaker Novartis AG (NYSE:NVS) (Basel, Switzerland) has launched what has transformed into a nearly $50 billion deal to acquire Alcon (NYSE:ACL) (Fort Worth, Texas), the U.S. eye care company. The deal, reportedly the largest in Swiss history, has grown from Novartis' initial $10.4 billion Alcon investment last year with Alcon's parent company, Swiss food maker Nestle (Vevey, Switzerland). The buy will instantly elevate Novartis in the burgeoning eye care industry.

The latest incarnation of the Alcon deal has Novartis buying the remaining majority stake from Nestle for $28.1 billion, which in turn will raise its own stake to 77%. To complete the deal, Novartis is offering up to $11.3 billion of its shares to Alcon's minority shareholders for the remaining 23% of the company. The total cost in cash and stock will $49.8 billion.

With the transaction, Novartis will be able to offer a product line covering an estimated 70% of the eye-care sector. The company will gain consumer eye-care, pharmaceutical and surgical business lines for which Alcon reported $6.3 billion in 2008 sales. Assuming the deal goes through in mid-2010, the Alcon lines will merge with Ciba Vision, Novartis' existing eye-care business, to operate as one division.

Nestle's acquisition of Alcon in 1977 for $280 million has proven to be a shrewd move as analysts estimate that the company has multiplied its initial investment by more than 140 times over the past three decades. Robert Alexander and William Conner founded Alcon in 1945 as a pharmacy in Fort Worth, Texas, with a focus on sterile ophthalmic products. The company name is a combination of the first parts of each of the founder's last names.

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