Novartis may opt out of Alcon deal

Novartis betrothed itself to Alcon, but it may not follow through with the engagement. CEO Daniel Vasella (photo [1]) told Bloomberg that his company might just pass on its option to buy a majority stake in the eye-care company.

Last year, Novartis bought 25 percent of Alcon from Nestle, at a price of $143 per share, or $11 billion. That deal included an option to boost its stake to 77 percent, at a price of $181 per share, anytime after January 2010 and before July 2011. But now that Alcon's stock has dropped to $111, that $181 price tag looks way too expensive (even $143 seems overpriced).

Now, Novartis had a strategical reason for buying its Alcon stake: Vasella wanted to diversify. The company figured that broadening its reach beyond pharmaceuticals could help it weather the coming patent-expiration storm. But even the best-laid plans of mice and men... well, you know how the saying goes. "From the point of the fundamentals, of the fit of the business, of the strategy, all that has not changed, but you cannot look at that in isolation," Vasella told Bloomberg. "It is in a context of financial terms. I hope that it can be done, but obviously there are also significant uncertainties."

Nestle, however, can require Novartis to follow through on the purchase--but at a lower premium of 20.5 percent to Alcon's stock price when the option is exercised. But we'll have to wait till next year to find out whether Nestle twists some arms.

- read the Bloomberg piece [2]

Related Articles:
Novartis and Alcon - Top 10 deals of 2008 [3]
Novartis wraps first phase of Alcon buyout [4]
Novartis pledges $39B for Alcon [5]
What did Vasella see in Alcon? [6]