Now that eyecare company Alcon has seen its shares recover--rising almost 6 percent just yesterday--Novartis is more likely to buy that majority stake from Nestle. The deal had come into doubt as Alcon stock languished, making it less attractive for Novartis to exercise its option to buy or for Nestle to force through a sale.
Novartis bought 25 percent of Alcon from Nestle for $11 billion last year. At the time, Novartis also agreed to an option to buy another 52 percent for around $28 billion, or $181 per share. Even if Novartis didn't choose to exercise that option, Nestle could exercise its option to sell at a 20.5 percent premium on the trading price.
Now that Alcon shares are up to $158.10, analysts are rubbing their hands in anticipation of a deal. "Nestle will face only risks and would gain nothing by waiting," Kepler Capital Markets analyst Tero Weckroth told Reuters. "We expect Nestle to exercise its option in early January. The current share price, with Nestle's 20.5 percent premium, amounts to more than $190 per share. That tops Novartis' option price, of course, a development that isn't cheering Novartis-watchers. "It's going to be a very expensive deal for Novartis," Sarasin analyst David Kaegi said.
- read the Reuters news