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Novartis completes purchase of majority interest in Alcon

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Novartis has completed its purchase of the remaining 156 million shares (52%) of Alcon stock owned by Nestlé for $28.3 billion in cash.

The deal, completed following an April 2008 agreement between Nestlé and Novartis, positions Novartis as Alcon's majority shareholder, with claim to 77% of Alcon's outstanding shares. The transaction will not affect the remaining 23% of the company's shares that trade publicly on the New York Stock Exchange, according to a press release from Alcon.

However, Novartis' full merger proposal to acquire the remaining 23% of Alcon stock held by minority shareholders — rejected by Alcon's board of directors as "grossly inadequate" — stands at a fixed exchange ratio of 2.8 Novartis shares for each remaining Alcon share, currently valued at approximately $142.

Pursuant to the agreement, five Nestlé-allied members of Alcon's board of directors have tendered their resignations and five Novartis-allied board members elected on Aug. 16 have been activated into service, effective immediately.

"While Novartis is now our majority owner, Alcon remains an independent, publicly listed company, and it is important to maintain good corporate governance around related-party transactions," Kevin Buehler, Alcon president and chief executive officer, said in the release. "Alcon will continue to abide by the Organizational Regulations, which require the IDC to review and approve all related-party transactions, including the Novartis proposed merger."

Effective immediately, Alcon will be fully consolidated in the Novartis financial reporting. According to a preliminary estimate, the additional pre-tax amortization of intangible assets stands at approximately $2.1 billion per year, with an estimate of $400 million, including inventory step-up, for the four remaining months of 2010, according to a separate release from Novartis.

"We are delighted to become majority owners of Alcon," Joseph Jimenez, CEO of Novartis, said in the release. "Together, both companies can achieve their strategic priorities to deliver against patient needs through innovative and differentiated products."