Novartis acquires 100% control of Alcon in $12.9 billion deal

BASEL, Switzerland — Novartis has entered into a definitive agreement to acquire the remaining 23% minority interest in Alcon at a value of $168 per Alcon share, for a total of $12.9 billion.

Once the merger is completed, Novartis plans to designate Alcon as its new eye care division, comprising CIBA Vision, as well as an ophthalmic medicine department. Novartis expects the formation of the new division to take approximately 6 months and for annual cost synergies after the consolidation of full ownership to reach $300 million, according to a press release from the company.

Current Alcon president and CEO Kevin Buehler will run the new Alcon division.

"This merger will create a stronger eye care business with broader commercial reach and enhanced capabilities to develop innovative eye care products that fulfill unmet clinical needs in eye care," Mr. Buehler said in the release. "The combination of Alcon's deep understanding of the eye care specialty and the broad expertise and scale of Novartis will address virtually all key areas of eye care and position the Alcon business unit for faster growth."

Under the terms of the agreement, the merger consideration will include up to 2.8 Novartis shares for each Alcon share, with an added contingent value amount in cash to ensure that each Alcon share reaches $168 in value. If the price of 2.8 shares of Novartis stock is valued in excess of $168, Novartis will reduce the number of its tendered shares accordingly, according to the release.

Novartis plans to add cash to the transaction through a combination of a contingent value amount and the reauthorization of a share buyback that was first approved during the company's 2008 annual general meeting. Under the terms of the share buyback, Novartis will be authorized to repurchase shares up to a maximum amount of 10 billion Swiss francs through a second trading line on the SIX Swiss Exchange. The buyback program, effective immediately, will be subject to legal restrictions and market conditions, according to the release.

Based on the current Novartis share value of $56, the contingent value amount would be settled for approximately $900 million in cash. Alcon shareholders will be able to chose between receiving Novartis shares or Novartis American Depositary Shares, the release said.

The merger, which has already been approved by Alcon's board of directors, must also receive approval from the U.S. Securities and Exchange Commission and will need to meet customary closing conditions.

"The growth synergies here are significant, as Alcon will be the eye care development engine for our best in class research organization and will leverage the Novartis market access capabilities outside the U.S.," Joseph Jimenez, CEO of Novartis, said in the release. "I am very pleased that we were able to come to this agreement and will be able to provide Alcon employees the full benefits of being part of the Novartis Group."

The merger is expected to close during the first half of 2011.