Feb 18 2010
The Alcon Independent Director Committee (the “Committee”) of Alcon,
Inc. (NYSE: ACL)
today announced that RiskMetrics Group, Inc., a global leader in risk
management, corporate governance and financial research and analysis,
has raised concerns about the adequacy of the merger proposal by
Novartis AG (“Novartis”) to Alcon’s minority shareholders and the
legality of any attempt by Novartis to unilaterally impose a full
takeover of Alcon.
“as
soon as [Novartis] closes on its purchase of Nestlé’s 52% stake, it
seems to us a challenge to argue that this provision would not apply to
[Novartis], in spirit if not in fact.”
In a note to clients issued yesterday, RiskMetrics presented its
preliminary views on Alcon’s valuation, which are largely consistent
with the views previously expressed by the Committee. Specifically,
RiskMetrics’ independent analysis:
-
Determined that premiums paid on precedent squeeze-out transactions
were on average 18.0% and 23.8% above the 1-day and 4-week target
price, respectively, as compared to the Novartis proposal which
offered a discount of 7.0% and 5.0%, respectively.
-
Disputed Novartis’ claims that Alcon’s stock was trading with takeover
speculation, noting that “all minority interests purchased in
precedent transactions would also likely have been subject to takeover
speculation prior to the actual buy-in announcements, and as such, the
actual premiums paid in such precedent transactions would be over and
above the target’s ‘inflated’ market share price.”
-
Noted that the price Nestlé negotiated for its stake two years ago is
“to a large extent irrelevant to minority shareholders,” who are now
being asked to consider a different price and a different form of
consideration.
-
Produced an unaffected Alcon share price ranging from $149.24 to
$155.63, versus the $137 that Novartis put forth, based on a variety
of EBITDA and P/E based valuation methodologies.
-
Addressed synergies, with RiskMetrics stating that they believe the
“minority shareholders should still receive a fair share of the
potential synergy value that is contingent on a full takeover of
[Alcon].”
In addition, RiskMetrics questioned the spirit of the Novartis merger
proposal. In particular, RiskMetrics noted that “[Novartis] is clearly
aware of the many legal protections afforded minority shareholders in
various global jurisdictions, protections designed to prevent exactly
this type of situation.” As one example, RiskMetrics highlighted Article
V, Section 5 of the Alcon Organizational Regulations and stated that “as
soon as [Novartis] closes on its purchase of Nestlé’s 52% stake, it
seems to us a challenge to argue that this provision would not apply to
[Novartis], in spirit if not in fact.”
RiskMetrics also noted that “relying on technicalities to discriminate
against one set of shareholders is clearly not best practice,” and that
RiskMetrics will “continue to monitor this situation.”
Thomas G. Plaskett, Chairman of the Committee, said, “RiskMetrics is the
leading independent advisor to investors on proxy and governance matters
and its findings support our conviction that the Novartis proposal is
grossly inadequate and unfair to Alcon’s minority shareholders.
RiskMetrics is rightly concerned by Novartis’ attempt to trample on the
rights of Alcon’s minority shareholders.”
The Committee also renewed its pledge to defend the rights of Alcon’s
minority shareholders through all appropriate and available actions.
On January 4, 2010, Novartis proposed acquiring the publicly-traded
minority shares of Alcon in an all-share swap, valued at the time of the
announcement at $153 per Alcon share. Novartis simultaneously announced
its intent to purchase a 52% stake in Alcon from Nestlé for $180 in
cash. Last month, the Committee formally responded to Novartis’ merger
proposal to minority shareholders, finding the price and other terms
proposed by Novartis to be grossly inadequate.
Greenhill & Co., Sullivan & Cromwell LLP and Pestalozzi, Zurich, the
Committee’s independent financial and legal advisors, are continuing
their work in preparing the Committee to vigorously defend Alcon and its
minority shareholders.
Important information regarding the proposal is posted on the
Committee’s Web site: http://www.transactioninfo.com/alcon.