Novartis exercises option, merger proposal with Alcon

Huenenberg, Switzerland

-Novartis AG has exercised its option to purchase the remaining shares in Alcon Laboratories Inc. owned by Nestle S.A. at a weighted average price of $180 per share in cash, according to prepared statement from Alcon. Upon completion of the purchase, Novartis would own about 77% interest in Alcon.

The exercise is pursuant to an agreement between Nestle and Novartis that was executed on April 7, 2008. The option exercise is subject to regulatory approvals and covers about 156 million shares of Alcon held by Nestle, representing about 52% of Alcon's outstanding shares.

In addition, Novartis also has submitted to the Alcon Board of Directors a proposal for a merger of Alcon with and into Novartis to be effected under Swiss merger law. Under the terms of the merger proposal, holders of about 23% of Alcon shares that are publicly traded would receive 2.8 Novartis shares for each Alcon share. Based on the Novartis share price and U.S. dollar/Swiss franc exchange rates prior to the announcement, this would value each publicly traded share of Alcon at about $153.

The proposed merger is subject to approval by the Alcon Board of Directors, the closing of the purchase and sale transaction related to the Novartis option exercise, as well as receipt of required regulatory approvals.

An independent director committee of the Alcon Board of Directors is evaluating the terms of the proposed merger, Alcon announced in the statement. The committee was formed in 2008 in connection with Novartis' initial purchase of about 25% of the Alcon shares from Nestle in order to protect the interests of the minority holders of publicly held Alcon shares in transactions such as Novartis' merger proposal, according to the statement.

The committee, in response to comments made Jan. 4 by Novartis AG, stated its belief that “Alcon has established certain important protections for the benefit of Alcon's minority shareholders against a coercive takeover bid and is disappointed that Novartis is attempting to circumvent those protections and corporate governance best practices.”

The transaction is estimated to cost about $38.5 billion, Novartis said in a prepared statement. Completion of the acquisition is expected in the second half of 2010, according to the Novartis statement.