Novartis completes purchase of Alcon shares

August 27, 2010

Novartis AG and Nestlé S.A. announced that they have completed the purchase and sale of about 156 million shares of Alcon Inc. $28.3 billion in cash.

Huenenberg, Switzerland-Novartis AG and Nestlé S.A. announced that they have completed the purchase and sale of about 156 million shares of Alcon Inc. $28.3 billion in cash.

The transaction was consummated pursuant to an agreement between Nestlé and Novartis that was executed on April 6, 2008. With the completion of this transaction, Novartis is now Alcon’s majority shareholder and controls about 77% of Alcon’s outstanding shares. Effective immediately, the five Nestlé-designated members of the Alcon Board of Directors have tendered their resignations and the Aug.16 election of the five Novartis-designated directors is deemed effective.

“I would like to thank Nestlé for their outstanding contributions and support of Alcon for more than 30 years, which has been an important part of making Alcon the global leader in ophthalmology,” said Kevin Buehler, Alcon’s president and chief executive officer. “We now welcome Novartis as our new majority owner and look forward to working with them to further enhance Alcon’s business model, provide opportunities for future growth, and deliver benefits to customers and patients around the world.

 “While Novartis is now our majority owner, Alcon remains an independent, publicly listed company, and it is important to maintain good corporate governance around related-party transactions,” Buehler added. “Alcon will continue to abide by the Organizational Regulations, which require the IDC to review and approve all related-party transactions, including the Novartis proposed merger.”

The transaction announced by Nestlé and Novartis does not affect the remaining 23% of Alcon’s shares that trade publicly on the New York Stock Exchange. On Jan. 4, 2010, Novartis proposed a merger of the two companies under Swiss merger law at a fixed exchange rate of 2.8 Novartis shares for each Alcon share, which has a current value of about $142. The Independent Director Committee (IDC) of Alcon’s Board of Directors reviewed this proposal and rejected it on Jan. 20 based on inadequate value.

Thomas G. Plaskett, chairman of the IDC, said, “We look forward to negotiating a deal that affords fair value to Alcon’s minority shareholders. An agreed transaction is in the best interests of all stakeholders and is clearly preferable to protracted litigation, which would delay critical steps in the integration process. However, we are ready to defend the rights of Alcon and its minority shareholders if Novartis refuses to negotiate a fair deal.”

The closing of the Nestlé/Novartis transaction satisfies the condition of the election of Novartis’ five additional designees to Alcon’s board, which was made on Aug.16 despite their overwhelming rejection by minority shareholders. The Novartis designees have a clear conflict of interest with respect to any decision regarding Novartis’ merger proposal to minority shareholders, according to a statement from Alcon. As previously announced by the IDC and supported in a legal opinion issued by Professor Hans Caspar von der Crone, a leading Swiss corporate governance expert, the role of non-conflicted directors in related-party transactions is established both by Swiss law and Alcon’s organizational documents. Accordingly, a positive recommendation by the IDC is required with respect to any related-party transaction between Alcon and Novartis, including the merger proposal, and the IDC’s powers and duties cannot be altered without the consent of the IDC.