Replies to post #88433 on Biotech Values

[DewDiligence]

MNTA IDIX etc: On today’s NVS CC, in reply to an analyst’s question about why NVS is using $11B of stock rather than cash to buy out ACL’s minority shareholders, CFO Raymond Breu said, “We want to maintain balance-sheet flexibility to do other smaller acquisitions.”

[DewDiligence]

Unlike DNA in its pursuit by Roche, ACL’s minority shareholders
have no bona fide legal protection from a forced buyout by NVS on
whatever terms NVS deems reasonable. Thus ACL’s committee of
“independent directors” has about as much real power as the heads
of the non-Russian republics within the former Soviet Union. ACL’s
directors can make a lot of noise but, if they vote against the NVS offer,
NVS can simply replace them with its own slate of directors and revote.

http://finance.yahoo.com/news/Alcon-Independent-Director-bw-1137587211.html?x=0&.v=1

›Alcon Independent Director Committee Responds to Novartis

Monday January 4, 2010, 6:15 pm EST

HUENENBERG, Switzerland--(BUSINESS WIRE)--The Alcon, Inc. (NYSE: ACL) Independent Director Committee, in response to comments made today by Novartis AG (NYSE: NVS), 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.

Alcon, a majority-controlled entity since it became a public company in 2002, established certain protections in its governing documents for the benefit of its minority shareholders. For example, Article V, Section 5 of Alcon’s Organizational Regulations requires approval by a committee of independent directors (as defined under the New York Stock Exchange rules) in connection with a number of transactions, including any proposed merger with a majority shareholder. The full Organizational Regulations are available on Alcon’s website at www.alcon.com/en/investors-media/ (click through Corporate Governance).

Following Novartis’ initial purchase from Nestle of an approximately 25 percent stake in Alcon, the Alcon Board of Directors recognized the need for the establishment of a standing committee of independent directors whose stated purpose is to protect the minority shareholders in connection with a number of transactions, including related party transactions between Alcon and major shareholders of Alcon. This action was approved by the full Alcon Board of Directors in December 2008.

Novartis appears to be attempting to circumvent the minority protection principles embodied in the actions noted above by claiming that the Alcon minority shareholders are neither accorded minority protections under the Swiss Takeover Code nor the rules under the NYSE. [Scratch the word “appears” — the above is what NVS is plainly doing.]

Under any circumstance, Swiss corporate law requires any merger proposal to be approved by a majority of the Alcon Board of Directors with “interested” directors abstaining. Assuming that the Novartis and Nestle board representatives along with the Alcon executive board representative abstain, approval by the independent directors comprising the Independent Director Committee would be required to approve a merger with Novartis.

On its investor conference call this morning, Novartis expressed its view that, if it were unable to obtain the required approval of the Alcon Board of Directors and the Independent Director Committee, Novartis would simply wait until it owned 77 percent of Alcon to then unilaterally impose the terms of the proposed merger on the minority shareholders. Such a unilateral action would clearly be inconsistent with the minority protection principles upon which Alcon established itself and Alcon shareholders rely.

While Novartis has expressed its view that the merger proposal is fair, the Independent Director Committee and its advisors will inform the Alcon shareholders of its formal position once the Committee and its advisors complete their evaluation.

About Alcon

Alcon, Inc. is the world’s leading eye care company, with sales of approximately $6.3 billion in 2008. Alcon, which has been dedicated to the ophthalmic industry for 65 years, researches, develops, manufactures and markets pharmaceuticals, surgical equipment and devices, contacts lens solutions and other vision care products that treat diseases, disorders and other conditions of the eye. Alcon operates in 75 countries and sells products in 180 markets. For more information on Alcon, Inc., visit the Company’s web site at www.alcon.com.‹

[DewDiligence]

Alcon has become a serious drag on NVS:

http://finance.yahoo.com/news/no-quick-fix-seen-novartiss-125103226.html

The hugely expensive multi-step acquisition of Alcon from Nestlé and minority shareholders (#msg-45072999) must rank as one of the worst M&A transactions in the drug/biotech industry during the past decade.

[DewDiligence]

NVS could take $15-25B loss on Alcon sale:

https://www.bloomberg.com/gadfly/articles/2017-04-20/novartis-alcon-sale-will-take-a-bargain-price

[DewDiligence]

NVS seeks to divest Alcon—will take enormous loss relative to $50B (cumulative) acquisition price:

https://www.bloomberg.com/news/articles/2018-06-29/novartis-to-spin-off-alcon-buy-back-up-to-5-billion-of-stock