The Swiss pharmaceutical group Novartis has purchased a controlling stake in Nestl├®ÔÇÖs Alcon, the world's largest eye care firm, for Ôé¼19.7 billion.
The purchase of the additional 52 per cent stake in H├╝nenberg, Switzerland-based Alcon follows a deal agreed in 2008 between Novartis and the food giant Nestl├®, which is headquartered in Vevey, Switzerland.
That deal saw Basel, Switzerland-based Novartis buy 25 per cent of Alcon for approximately Ôé¼7.2 billion, with an option to purchase Nestl├®'s additional 52 per cent majority stake from January 2010.
That this second part of the deal would go through was widely expected after Alcon shares rose to a level that made it attractive for both companies to go through with the second stage of the deal.
Novartis is now proposing to buy out the remaining 23 per cent of Alcon shares by issuing new Novartis shares worth approximately Ôé¼7.8 billion.
Alcon is a leading manufacturer of eyecare products and contact lens solutions. It is also the world's biggest producer of medical devices for cataract and other eye surgery, including artificial lenses. It also makes eye drop medicine for glaucoma and eye allergies.
Novartis manufactures contact lenses through its CIBA Vision division but it does not make lens solution.
The purchase marks one of EuropeÔÇÖs biggest ever takeovers; together, Alcon and Novartis will provide products that cover 70 per cent of the global eye care sector.
Novartis believes it will now be able to generate $200 million (Ôé¼140 million) in cost savings within three years. Furthermore, if it were to acquire 100 per cent of Alcon, the company believes it could save another $100 million (Ôé¼70 million).
"The addition of Alcon will strategically strengthen our healthcare portfolio and our position in eye care, a sector with dynamic growth due to the increasing patient needs of an aging population," said Daniel Vasella, chairman and CEO of Novartis, commenting on the deal.
"This is the right time to simplify AlconÔÇÖs ownership to eliminate uncertainties for employees and shareholders.
ÔÇ£It will also allow us to strengthen innovation power by combining R&D efforts and grow our global market presence thanks to our complementary product portfolios."
There has been speculation that Nestl├® will use some of the $28.1 billion (Ôé¼20 billion) proceeds from the Alcon sale for acquisitions, including a possible bid for Cadbury, the UK-based confectionary group that is subject to a ┬ú10.3 billion (Ôé¼11.6 billion) hostile bid by US-based food giant Kraft.
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