Analysts question Novartis-Alcon deal

Did Novartis leap too soon into M&A this cycle? Its deal to buy Nestle's stake in the eye-care company Alcon [1]--25 percent for $11 billion last year, plus another 52 percent next year--is getting the fisheye in the press lately. Not only is Alcon considerably cheaper now that it was last year, with its stock price down 24 percent to $113, but the billions Novartis has tied up in the deal has sidelined the company from any big-time deal activity.

As the Wall Street Journal reports today, analysts are questioning the deal's wisdom: "This certainly wasn't a masterpiece in deal-making," a Sarasin analyst told the paper. Part of the problem is that Novartis has to have the cash on hand to buy the Alcon stake, but isn't sure that Nestle will end up selling--especially at a price that Novartis would be willing to pay at this point. The Swiss company could exercise its buy option, but that price is $181 per share, an enormous premium to today's market prices. Otherwise it has to wait for Nestlé to exercise its sell option, at a price that's a 20 percent premium to the market. And it may end up waiting quite a while; the options run for 19 more months.

- read the WSJ story [2]

ALSO: Novartis defied the WHO and some of its corporate peers by ruling out a donation to the poor of vaccines to counter the latest flu pandemic, and saying developing nations or donor nations should cover the costs, the Financial Times reports. Report [3]

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Novartis may opt out of Alcon deal [4]
Novartis wraps first phase of Alcon buyout [5]
Novartis and Alcon - Billion-dollar deals [1]
Novartis pledges $39B for Alcon [6]