Novartis Buys Alcon From Nestle

After tight-lipped negotiations which started in December, Nestle and Novartis inked the $39 billion sale of Nestle-owned Alcon to Novartis. The Alcon deal is the first such deal of its kind, according to A&O partner Daniel Cunningham, who worked on it. In the first stage, Novartis will pay $143 a share for 25% of Alcon, for a total of $11 billion. Under the second part of the deal, Novartis has put and call option rights on Nestlé’s remaining Alcon shares beginning Jan. 1, 2010 and expiring July 31, 2011. The call grants Novartis the option to buy Nestlé's remaining Alcon shares for $181 per share. Nestlé has a put option to sell its remaining Alcon shares to Novartis at the lower of Novartis’s call price of $181 per share or at a 20.5 percent premium above the market price of Alcon shares, which will be calculated as the average price of Alcon shares during the week before the exercise date of the put option.  The call/put feature of the second stage is novel and clever.  The call/put prices the second stage of the deal at market plus 20% with a cap at $181 per share.