Biotech Values

[DewDiligence]

NVS: The market does not like the Alcon deal, evidently. NVS closed down 3.3%—a big move for such a stable stock—on an up day for the broad market.

Inasmuch as NVS’ call-option exercise to acquire Nestlé’s ACL shares was a foregone conclusion, I presume that today’s price action stems from NVS’ buyout of ACL’s minority shareholders for $11B in stock.

I disagree with the prevailing market opinion on this point; it makes little sense, IMO, for NVS to have continued to own 77% of ACL, precluding the kinds of synergies that can come only from full ownership. Yes, NVS could have used cash rather than stock to acquire the minority shareholders, but I accept at face value the stated reason for using stock (#msg-45077123).