In a bid to diversify its business away from traditional pharma, Novartis has bought a 25 percent stake in Alcon and is eyeing the purchase of another 52 percent in 2010. The Swiss drugmaker paid $11 billion for this first chunk of the Texas-based eye care business and has an option to buy the rest for $28 billion more.

CEO Daniel Vasella (photo [1]) called Alcon an "excellent" strategic fit with Novartis, which makes contact lenses and ophthalmic drugs. The deal furthers his strategy of drilling into high-growth areas of the market, he said. "Eye care will continue to grow dynamically as there is a growing unmet medical need driven primarily by the world's aging population." Alcon makes eye drops, contact lens solutions, surgical equipment, and implantable lenses.

Analysts, however, said the deal wasn't a bargain and that it wouldn't deliver much to Novartis's bottom line, at least initially. It's a good strategic fit, a Landsbanki Kepler analyst told the Financial Times, "but they won't be able to reap much in synergies right away because they're only buying a minority stake." Meanwhile, Standard & Poor's lowered its long-term credit rating on Novartis because the company said it would go into debt to finance the second chunk of its Alcon purchase.

- see the Novartis press release [2]
- read the article [3] in the FT
- check out the ratings news [4] at Orange
- get MSNBC's take [5]
- find the coverage [6] in Forbes

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CEO: Novartis plans big restructuring. Report [10]