Novartis may have thought it had Alcon in the bag, but the eye-care company's board is objecting. Not to the Nestle deal; that is in the bag. It's the offer Novartis made to minority shareholders worth $147 a share--less than the $180 per that Nestle's getting for its stock.
Not so fast, says Alcon. A special committee of Alcon's board has issued a statement accusing the Swiss drugmaker of trying to circumvent shareholder protections--and reminding Novartis that Swiss law requires a majority of board members to approve a full merger. The board has hired an independent advisor to determine whether the minority offer is fair.
So where does that leave Novartis? The drugmaker may end up raising its offer for the minority-held stock. But that could require a court challenge, because the company asserts a.) the price Novartis should pay to public shareholders should be significantly less because those shares don't give Novartis control; and b.) that Swiss law actually allows Novartis to force the deal without board approval.
At least some analysts think that the argument will end up going Alcon's way. "We still view the argument that Novartis should pay the public shareholders, including management, significantly less than it paid Nestle as a difficult one to sell," JPMorgan Chase's Michael Weinstein writes to investors (as quoted by Bloomberg). So, the drugmaker probably will "ultimately raise its offer price," he says. Stay tuned.
ALSO: The Wall Street Journal questions whether the Alcon deal will pay off for Novartis. Report
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