Alcon Shareholders Approve Merger - Analyst Blog

Alcon Inc. (ACL) recently announced that its shareholders have approved of the company's merger with Novartis AG (NVS). Per the terms of the merger agreement, Alcon shareholders will receive 2.9228 Novartis shares or American Depositary Shares (ADS) along with a cash payment of $8.20 for each share that they hold.

We note that the completion of the merger is subject to approval by the Novartis shareholders.

The Alcon board had approved the merger in December last year, following a favorable recommendation from the Independent Director Committee and a fairness opinion issued by Lazard Ltd. (LAZ), among other things.

Following the completion of the merger, Alcon will become the second largest division within Novartis. Moreover, Novartis' CIBA Vision, select eye care medicines and an Alcon business wing will be integrated into Alcon, forming an organization, which will contribute more than $8.7 billion in sales (over 70%) to the eye care segment.

This acquisition will help Novartis diversify and make up for revenues lost to generic competition. Moreover, it will help the company bolster its position in the eye care market, which presents significant growth potential due to the unmet needs of an aging population.

Novartis had first announced its intention to gain full ownership of Alcon in early January 2010. At that time, the former had a 25% stake in the latter. In April 2010, Novartis acquired 156 million shares of Alcon from Swiss corporation Nestlé S.A. for $28.3 billion, raising its stake in the company to 77%. Novartis' outlay for acquiring the entire 77% stake in Alcon was about $38.7 billion.

Currently, we have Neutral recommendations on both the companies, supported by Zacks #3 Ranks (short-term Hold rating).