Minority Shareholders Resisting Takeover of Alcon by Novartis
By Jim Greene
Published on February 12, 2010
Some minority shareholders in eye care company Alcon, Inc., are rejecting a stock swap proposed by health care giant Novartis AG as part of its plan to take over Alcon and merge the two companies. A class action lawsuit to block the deal was filed last month in a New York federal court on behalf of all shareholders by attorneys for the Erica P. John Fund.
Plaintiffs in the case filed in U.S. District Court for the Southern District of New York claim the Novartis offer undervalues their stock. Novartis recently made an offer to food giant Nestlé S.A. to buy its 52 percent ownership in Alcon for about $180 per share. The deal being offered to them, say the plaintiffs, was worth only about $145 per share at the time of filing.
Takeover Began with 2008 Nestlé Deal
Novartis began its takeover of Alcon by purchasing 25 percent of Alcon shares from Nestlé in 2008. All three companies are headquartered in Switzerland: Novartis in Basil, Alcon in Hünenberg, and Nestlé in Vevey. Alcon was founded in Fort Worth, Texas, in 1945 and purchased by Nestlé in 1977.
Under European Union rules, once Novartis completes the current Nestlé deal and controls 77 percent of Alcon stock, Novartis can buy out all remaining shareholders as a group, if at least two-thirds of them agree. Swiss rules allow the buyout offer to be as low as 25 percent below current share value.