January 25, 2010 / 12:18 PM / 8 years ago

Alcon investor expects Novartis to raise offer

ZURICH (Reuters) - Novartis AG’s NOVN.VX bid to buy out minority shareholders in Alcon ACL.N does not fairly value their holdings, one of the largest investors in the eyecare group said.

Swiss drugmaker Novartis, which has a deal to buy a majority of Alcon from Nestle SA NESN.VX, has made what Alcon’s independent directors regard as a lowball offer originally worth $11.2 billion for the remaining 23 percent.

“We do not think that the current offer of Novartis fairly values the minority shareholders’ position,” Sebastian Buch, a fund manager at Union Investment Privatfonds, told Reuters. “We would expect Novartis to increase its offer.”

Union Investments is the 13th largest shareholder in Alcon, when Novartis and Nestle are excluded, with 911,300 shares.

That equates to about 0.3 percent of Alcon’s total shares or 1.3 percent when the holdings of the two Swiss groups are excluded.

Shares in Novartis, which declined to comment, fell 0.8 percent to 55.80 Swiss francs by 1128 GMT, underperforming a DJ Stoxx European healthcare sector .SXDP which was also weaker.

Novartis is offering minority shareholders 2.8 of its own shares for each outstanding Alcon share, equivalent to about $151 per share at latest prices. Alcon closed at $155.81 on Friday as markets expected a sweetened offer.

Both are lower than the average $168 per share Novartis is paying to buy a 77 percent stake from Nestle and the $180 agreed this month for the purchase of the second tranche of that deal.

Independent directors of Alcon said last week the offer from Novartis -- which hopes Alcon will diversify its business and insulate against losing patent protection on big selling medicines -- was “grossly inadequate.”

“I‘m not certain it’s in Novartis’ best interest to improve the offer now rather than later,” said Vontobel analyst Andrew Weiss.

”Swiss merger law foresees for minority shareholders to protest but only after the deal is closed,“ Weiss said. ”If Novartis offers a higher price now they could land in court later anyway.

“If they are going to improve their offer, they may prefer to do it in one go, in court.”

Writing by Sam Cage; Editing by Louise Heavens and Rupert Winchester

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