Novartis Kick-Starts Merger Activity With $40B Alcon Purchase

By Antonio Perez
Antonio Perez
Antonio Perez
January 4, 2010 Updated: October 1, 2015

Swiss healthcare giant Novartis is buying vision specialist Alcon for $40 billion. (Sebastien Bozon/AFP/Getty Images)
Swiss healthcare giant Novartis is buying vision specialist Alcon for $40 billion. (Sebastien Bozon/AFP/Getty Images)
This year’s mergers activity got off to a healthy start on Monday as consumer health care giant Novartis AG said it would take control of eye care company Alcon Inc. in a deal valued at $40 billion.

Alcon is the world’s largest eye care product company. It is a leading provider of surgical devices for eyes, as well as the makers of the “Opti-Free” line of contact lenses and lens solutions.

Novartis is one of the world’s biggest pharmaceutical companies, with 2008 annual revenues in excess of $40 billion.

Consumer food and beverage company Nestle SA currently is the majority owner of Alcon. In the proposed transaction, Novartis would purchase Nestle’s 52 percent ownership in the company for $28.1 billion, and bid an additional $11.2 billion for the remaining shares in Alcon.

Novartis currently is a 25 percent minority shareholder in Alcon, which the company bought from Nestle in April 2008. Nestle bought Alcon in 1977—more than 30 years ago—for a mere $280 million.

“The addition of Alcon will strategically strengthen our health care portfolio and our position in eye care, a sector with dynamic growth due to the increasing patient needs of an aging population,” said Dr. Daniel Vasella, chairman of Novartis, in a statement.

Leader in Vision Care

"This is the right time to simplify Alcon’s ownership to eliminate uncertainties for employees and shareholders,” Vasella said.

With the Alcon purchase, Novartis will have over 70 percent of the lucrative global vision care market share. Novartis currently has Ciba Vision and Lucentis brands in its eye care portfolio. The purchase allows Novartis to further take hold of the lucrative eye care market.

“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.”

Alcon is a leading provider of surgical devices and consumer contact lens care products. The company, currently based in Switzerland but operates its U.S. business out of Ft. Worth, Texas, is the global leader in cataract and vitreoretinal surgery.

“Alcon would round off the portfolio and the deal makes sense,” Falcon Private Bank portfolio manager Dieter Buchholz said in an interview with Bloomberg.

“The acquisition of Alcon will complement Novartis eye care business. As the two companies fit strategically, we expect this acquisition to produce synergies, going forward, and hence, do not anticipate a change in our current BUY rating for the ADR,” said Research Oracle in a research note regarding Novartis’ U.S.-listed shares on Monday.

Alcon was founded in 1945 in Ft. Worth as a pharmacy, and is named after its two founders Robert Alexander and William Conner. The name is the combination of the first parts of their last names.