As my fellow blogger, Gabby, noted in an earlier post, something seems rotten in the state of Switzerland. And the financial markets agree. Novartis, for a host of good reasons, wants to get into the eye care business in a big way by purchasing Alcon for close to $50 billion. It plans to buy a huge stake that Nestle has in Alcon for $180 a share. But it plans to pay the remaining “minority” holders 2.8 Novartis shares for each Alcon share they own – the equivalent of about $147. Traders apparently believe Alcon holders will fight to get more money – Alcon is trading around $160 – close to 9% higher.
Novartis says it believes paying different prices is “fair” because, paying more for the Nestle stake allows Novartis to gain control of Alcon. There is something that can be said about paying a control premium. But offering existing shareholders less than what they had at the end of last week? If Novartis wants to make good with a new set of shareholders (those minority Alcon folks), it should find a way to pony up more money.