The hottest Novartis acquired Alcon to expand new

2022-08-16
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Novartis acquired Alcon to expand new business areas

recently, Novartis pharmaceutical group of Switzerland has taken another big step towards the goal of establishing a global pharmaceutical giant. On the first day of the opening of the global stock market in 2010, the world's seventh largest pharmaceutical company announced that it would invest about US $39.3 billion to wholly acquire the world's largest ophthalmic drugs and medical devices company, Alcon, headquartered in Switzerland and listed in the United States, from Nestle and minority shareholders. Novartis chairman Wei sile issued a statement saying, "it is a great opportunity for us to acquire Alcon, the world's leading company in the eye care industry. On the whole, I think this is a transaction that is very in line with the company's strategy, and I am very optimistic about the prospects of this business."

get rich and grow by mergers and acquisitions

although Novartis' history can be traced back to more than 200 years ago, it was only 1996 that Ciba Cargill and Sandoz merged and became "Novartis". "Novartis" comes from the Latin novae Artes, which means "new technology". However, the reason why this enterprise, headquartered in Basel, Switzerland, can rapidly grow into a global healthcare giant with 97000 employees and businesses in more than 140 countries and regions in the world through only 13 years of development, is not only technological innovation, but also its use of modern financial means

Novartis, formed by the merger of two companies, seems to have an innate talent for mergers and acquisitions. Novartis was originally a chemical enterprise and later transformed into a pharmaceutical enterprise. After that, it was through a series of aggressive mergers and acquisitions that Novartis jumped from the third tier enterprise to the first tier in just a few years. From American eyesight to Slovenian LECO, from German Hercules to American Kairong, M & A activities finally established Novartis' position as a multinational pharmaceutical giant

in history, Switzerland has always played a decisive role in the world pharmaceutical industry. However, due to the continuous integration between multinational pharmaceutical giants in recent years, the ranking of Roche and Novartis, the two major Swiss pharmaceutical companies, in the world has been severely challenged, especially the gap with GlaxoSmithKline and Pfizer has been widening. In order to improve its international competitiveness, Novartis took the lead in launching the 1 The sample has a small strategic offensive. Up to 2003, Novartis increased its shareholding in Roche's decision-making shares to 33.3%. The Roche family, which can control the company's decision-making power, resolutely opposed the merger with Novartis by taking advantage of the complex dual holding system designed by the company before its listing. Although Novartis has not yet obtained the actual control of Roche, its goal is obvious. Weisile said that the investment in Roche will be treated as a long-term strategic investment and will never give up

US $49.7 billion M & a transaction

Novartis has paid attention to Alcon for a long time. As early as April, 2008, Novartis and Nestle reached a package agreement on the acquisition of Alcon. According to the agreement, Novartis is expected to spend about US $11billion to complete the acquisition of 25% equity of Alcon in the second half of 2008; From January 1, 2010 to July 31, 2011, Novartis will spend a total of about $28.1 billion at a weighted average price of $180 per share to acquire 52% of Alcon's equity; At the same time, Nestle has the right to require Novartis to acquire the remaining shares held by public investors (but not more than $180 per share) at a premium of more than 20.5% of Alcon's equity

in July 2008, Novartis actually invested US $10.4 billion to acquire 25% of Alcon's equity held by Nestle in advance, completing the first step of this transaction. On January 4, 2009, Novartis announced to exercise its call option, utilize its existing cash reserves, and complete the second step of the transaction through short-term and long-term debt financing of US $16billion, so that it holds 77% of the equity of Alcon. At the same time, Novartis also submitted a proposal involving the remaining 23% minority equity shares of Alcon to the board of directors of Alcon, proposing that Alcon be merged into Novartis in accordance with the Swiss Merger Law, and the publicly traded minority equity shareholders can replace Alcon's shares with Novartis' shares at a ratio of 1 to 2.8. According to Novartis' share price level on December 30, 2009, Novartis' merger proposal will value Alcon's publicly traded shares at about $153 per share, equivalent to a total of $11.2 billion

if this acquisition is successfully implemented, Novartis will acquire Alcon as its wholly-owned subsidiary at a total price of US $49.7 billion, setting a record for mergers and acquisitions in Switzerland

to be approved by Alcon

Novartis' acquisition road is not smooth. The approval of Alcon's board of directors is crucial to whether Novartis can acquire Alcon wholly as it wishes. Since its listing in 2002, Alcon has been controlled by major shareholders, but some protective measures have also been set up in its management regulations to safeguard the rights and interests of minority shareholders. For example, Article 5 of section 5 of Alcon's organizational regulations requires that certain transactions must be approved by the independent board committee, including the proposal to merge with major shareholders. When Novartis purchased about 25% of ALCOM's shares from nestle in 2008, ALCOM's board of Directors established an independent board committee to protect the interests of minority shareholders of ALCOM's listed shares involved in Novartis' Merger and other proposals to the greatest extent

Novartis' valuation of Alcon's publicly traded shares is about $153 per share, while the call option price of Nestle's equity is $180. The former is significantly lower than the latter, so the transaction price is unfair. Alcon's independent board committee, which is reviewing Novartis' merger proposal, issued a statement saying that it believed that Alcon had formulated important protective measures against the compulsory acquisition to safeguard the rights and interests of Alcon's minority shareholders. Novartis claimed that neither the Swiss takeover code nor the rules of the New York Stock Exchange gave Alcon's minority shareholders any minority shareholder protection. If the approval of Alcon's board of directors and its independent board committee cannot be obtained, Novartis will wait until its equity in Alcon rises to 77%, and then unilaterally force minority shareholders to implement the terms of the merger proposal

according to the current Swiss company law, this merger proposal must be approved by a majority of Alcon's board of directors, and "interested" directors must waive their voting rights. Assuming that the board representatives of Novartis and Nestle and the executive board representatives of Alcon abstain, the merger of Alcon and Novartis must be approved by the independent board committee. Analysts believe that Alcon's independent directors and minority shareholders may challenge Novartis in court to increase its offer and eliminate the price gap. Alcon's Independent Board Committee has said that neither the Committee nor Alcon's management has participated in the preparation of Novartis' merger proposal, and the Committee has confidence in the management's ability to continue to create higher value for shareholders

there are many benefits in the acquisition transaction

for Novartis and Nestle, the acquisition of Alcon is undoubtedly a win-win deal. In 1977, in order to expand the U.S. market and balance investment risks, food giant Nestle bought Alcon for $280million. Over the past 33 years, the profit of this investment has increased more than 100 times. After selling its shares in Alcon to Novartis, Nestle will have enough cash to implement its established business strategy. On January 6, the company announced that it would buy Kraft's quick-frozen pizza business in the United States and Canada with $3.7 billion in cash. The company also said it would buy back about $9.66 billion of shares to improve the company's balance sheet

for Novartis, this transaction can be described as a "timely rain". The pharmaceutical industry has always been regarded as a commercial "cash cow" and a sunrise industry. In the peak period of the 1990s, almost all major pharmaceutical enterprises were overflowing. This is largely due to the huge returns brought by patented drugs. Pharmaceutical industry is mainly driven by technological innovation. However, the investment in new drug research and development is large and the risk is high. It takes 10 to 15 years and 500 to 1 billion US dollars to obtain a listed innovative drug from 10000 new compounds, which has become the consensus of BASF in the industry to provide a comprehensive solution for sustainable construction based on its broad product portfolio and rich project experience. In recent years, the research and development of new drugs has become increasingly difficult, and the pharmaceutical giants have launched fewer and fewer new products every year. At the same time, now popular drugs are increasingly facing the problem of patent protection expiration, and the risk of brand drugs being out of stock increases. According to the prediction of authoritative market research institutions, in the five years from 2009 to 2013, products with annual sales of $137billion will lose patent protection. 15% of Novartis' product portfolio has the problem of patent expiration, including its heart disease drug "Devon", which will also expire in 2012. This will make Novartis directly face the fierce competition of generic drug companies, thus losing the huge source of funds needed to develop new drugs, resulting in the inability to develop new original drugs. In addition, the pharmaceutical industry is also facing the risk of policy regulation. For example, regulatory agencies such as the U.S. Food and drug administration have recently been more stringent in the approval of various new drugs, taking longer to approve drugs and requiring more data. The U.S. government's plan to include drug price control in the universal medical plan may also lead to a decline in the price of prescription drugs instead of an increase

these factors have a serious impact on the global pharmaceutical market. According to the report released by authoritative market research institutions, it is estimated that the growth rate of global drug sales in 2010 will be 4% to 6%, and the sales amount will be 825billion US dollars. Compared with the growth rate of 9% to 10% in previous years, this growth level is obviously low. Novartis' financial report has shown the difficulties encountered by the company in the patented drug business. In 2007, the performance of the company's core department, the pharmaceutical department, increased by only 2%, and suffered a 1% performance decline for the first time in the United States

facing the current difficulties, taking the road of diversified management has become an inevitable choice for many pharmaceutical enterprises. The Alcon acquisition case highlights Novartis' business strategy of preparing for a rainy day and expanding its business and improving its revenue through acquisition before the expiration of patented drugs. Novartis has been involved in the field of eye care for a long time, but its market share is not ideal. Alcon is the world's largest eye care company. In 2007, the sales volume of the global eye care market was about 2, which is absolutely reassuring for you to use $5billion. Alcon ranked first with a market share of $5.6 billion. In 2008, Alcon's global sales increased to $6.3 billion, with an operating profit margin of 35%, much higher than Novartis' 22%. Through the acquisition of Alcon, Novartis can obtain contact lens maintenance fluid, glaucoma treatment drugs, cataract surgery instruments and other products, and establish a broader portfolio of eye care products

Novartis predicts that after holding a total of 77% equity of Alcon, the annual pre tax cost savings will be about $200million. In the three years after the completion of this transaction, the pre tax cost savings will reach $300million. The advantages brought by the acquisition of Alcon include: saving production costs, especially in the purchase of raw materials; Through vertical management, reduce the cost of fatigue performance test or fatigue limit test and product sales cost of processing star high-tech gas spring testing machine, which is suitable for various valve springs, clutch springs, fuel injector pressure regulating springs and other springs; Simplify the portfolio approval procedures of enterprises, reduce the production quantity of licensed products, and strengthen the development of new products; Consolidated administration and

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