* Legal expert says Alcon board needs support of directors
* Alcon independent director committee repeats offer too low
* Novartis may need to up bid or drop full merger - analyst
* Novartis shares down 0.3 percent, Alcon little changed
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By Katie Reid
ZURICH, June 28 (Reuters) - Swiss drugmaker Novartis AG NOVN.VX could have to raise its buyout bid for Alcon ACL.N after a law academic advised Alcon’s independent directors’ committee (IDC) that their approval was needed for a deal.
Novartis agreed to buy a majority of Alcon from Nestle NESN.VX and has made what Alcon’s independent directors regard as a lowball offer, originally worth $11.2 billion but dependent on share price moves, for the remaining 23 percent.
“The Alcon board will not be able to validly decide on Novartis’ merger proposal without the IDC’s prior recommendation of that proposal,” Professor Hans Caspar von der Crone was quoted as saying in a statement from the IDC.
Kepler Capital Markets analyst Tero Weckroth said in a note on Monday: “After this news, it looks increasingly likely that Novartis will need to either increase its bid for the remaining shares or, alternatively, drop plans for a full merger.”
Alcon’s independent directors have repeatedly dismissed the original Novartis bid as inadequate and warned key personnel could leave the U.S. eyecare group due to the offer.
Novartis’s bid was pitched in stock and equates to about $137 per Alcon share at latest prices. The U.S. group’s stock was trading at $151.55 at 1420 GMT on Monday. Novartis shares were trading down 0.3 percent at 53.05 Swiss francs ($48.80).
“While we continue to hope that we can reach a negotiated deal, Professor von der Crone’s legal opinion makes clear that, regardless of Novartis’ ultimate course of action, the IDC’s recommendation is a mandatory step prior to the consummation of Novartis’ merger proposal,” Thomas Plaskett, chairman of the IDC, said.
Novartis, which is seeking to use the acquisition to insulate itself against losing patent protection on treatments such as top-selling blood pressure drug Diovan, was not immediately available to comment.
“Alcon Independent Board of Directors are stepping up their game to make life more complicated for Novartis. The IBD have gained a key opinion leader in the area of Swiss Merger law to support their case,” Vontobel analyst Andrew Weiss said.
“Following the Nestle transaction, expected in July/August, giving Novartis a 77 percent stake in Alcon, Novartis will need to resolve some legal issues before merging with the remaining Alcon shares,” he said.
Novartis, which bought 25 percent of Alcon in 2008, agreed in January to buy another 52 percent of the group, taking its holding to 77 percent for a combined price of $39.3 billion. It paid Nestle an average of $168 per Alcon share.
Alcon was bought by Nestle in 1977 for $280 million and is the global leader in ophthalmic surgery products, particularly for cataract operations, and also produces contact lens products and medicines for eye diseases such as glaucoma. (Editing by Will Waterman) ($1=1.087 Swiss Franc)