UPDATE 3-Novartis to push ahead with disputed Alcon buyout

* Novartis completes buy of 77 pct of Alcon from Nestle

* Seeking 100 pct ownership of Alcon

* Independent director committee repeats legal action threat

* Deal to add to core EPS in 2010 and 2011

* Shares in line with European healthcare index

(Adds Novartis CEO comment on buying the minority Alcon stake)

By Katie Reid

ZURICH, Aug 26 (BestGrowthStock) – Swiss drugmaker Novartis AG
(NOVN.VX: ) is pushing ahead with its contentious buyout of Alcon
(ACL.N: ) minority shareholders after completing its acquisition
of stock from Nestle (NESN.VX: ) to get control of the U.S.
eyecare group.

Novartis, which now holds a 77 percent stake in Alcon and
has a majority on the board, has been seeking to snap up the
remaining 23 percent since exercising its option to buy Nestle’s
stake in January.

Alcon’s Independent Director Committee has, however,
dismissed Novartis’s offer for the minority stake as too low and
repeated on Thursday it could take legal action in a bid to
secure a better price. [ID:nLDE67N1W8]

Novartis is seeking to diversify and insulate itself against
losing patent protection on big selling medicines, such as blood
pressure drug Diovan, by buying Alcon.

Alcon is the dominant player in the multi-billion-dollar
intraocular lens market and is also No. 1 in cataracts — an
area that is set to benefit from ageing populations.


Uncertainty over how Novartis intends to close the deal with
minority shareholders has caused its stock to underperform the
rest of the STOXX European healthcare index (.SXDP: ) this year.
At 1430 GMT, its shares were trading 0.7 percent higher,
outperforming the index.

Novartis is offering Alcon minority shareholders 2.8
Novartis shares for each Alcon share — an offer that is about
15 percent lower than the average price of $168 it paid to
Nestle in an all-cash deal worth $38.7 billion.

Novartis is banking on using Swiss law to help it push
through the deal, but this path may not be as straightforward as
it hopes and it could face a complicated legal battle to seal
the deal. [ID:nLDE67N1SB]

Novartis CEO Joe Jimenez said on a conference call on
Thursday the group was sticking to its offer for the minority
shareholders, which it has described as “full and fair”.

Jimenez said Novartis had not been able to reach common
ground with the Alcon board over the value of the stake. “We are
not in a hurry,” he said.

Some analysts believe Novartis will wait to see how its
share price develops before it makes any changes to its offer
and good news in its product pipeline, such as possible U.S.
regulatory backing for its MS drug Gilenia, could lift its

“We believe Novartis will ultimately have to improve its
offer, probably to around $165 per share. Whether negotiated
before or settled after the merger remains to be seen,” said
Vontobel analyst Andrew Weiss.

“Improving the deal terms at Novartis’s current share price
to $165 per Alcon share, i.e. 3.3 Novartis shares for 1 Alcon
share, would result in an additional dilution of roughly 1-2
percent for Novartis,” he said.

Novartis said it sees about $200 million of potential annual
pretax cost synergies as a result of this deal. This is expected
to rise to around $300 million if Novartis is able to clinch the
remaining 23 percent stake, Novartis has said.

Novartis also said it expected the acquisition of the 77
percent stake would show core earnings per share low single-
digit and high-single digit accretion in 2010 and 2011

Nestle said it will substantially reduce its net debt
position, which stood at 29.6 billion francs at the end of June
2010, as an immediate result of the completed sale.
(Editing by Erica Billingham and Mark Potter)

UPDATE 3-Novartis to push ahead with disputed Alcon buyout