Novartis plans to spin off eye care division Alcon; buy back, $5 bn shares
29 June 2018
Swiss pharmaceutical giant Novartis AG today said that it plans to spinoff Alcon, its eye care division, into a separately-traded standalone company, and buy back shares worth up to $5 billion.
The planned spinoff would enable Alcon to focus fully on its growth strategies, and allow Novartis to refocus on its core business — prescription drugs.
Novartis plans to hold a shareholder meeting in February 2019 to get approval for the spinoff, which is expected to be completed in the first half of next year, while the share buyback is due to be completed by the end of next year.
The Basel, Switzerland-based company plans to largely fund the buyback from the proceeds of the divestment of its consumer health joint venture stake to GSK.
Novartis had acquired US-based Alcon in 2011 for $52 billion. Novartis CEO Vas Narasimhan said that it was premature to give a valuation for Alcon, though Novartis’ previous CEO Joe Jimenez, had once estimated it at $25-$35 billion.
When Novartis acquired Alcon, the business included surgical, vision care and ophthalmic pharmaceuticals. In 2016, Novartis began the process of creating two businesses with the transfer of Alcon's ophthalmic pharmaceuticals to the Novartis Innovative Medicines Division.
The ophthalmology pharmaceuticals business, which had 2017 annual revenue of $4.6 billion, will continue to be part of Novartis.
The Alcon Division is fully focused on surgical and vision care, and continues to be the global leader in eye care devices.
If the Alcon spinoff is completed, it would create a new Switzerland-based company with over 20,000 employees, and annual sales of $7 billion.
Alcon’s US operations, based in Fort Worth, Texas, will continue to be its key location.
In addition to Alcon being incorporated in Switzerland, Novartis plans to list shares of Alcon on the SIX Swiss Exchange and the New York Stock Exchange.
Joerg Reinhardt, chairman of Novartis, said, "Our strategic review examined all options for Alcon ranging from retention, sale, IPO to spinoff. The review concluded that a spinoff would be in the best interests of Novartis shareholders and the Board of Directors intends to seek shareholder approval for a spinoff at the 2019 AGM.”
"We continue to execute our strategy to focus Novartis as a leading medicines company. Alcon has returned to a position of strength and it is time to give the business more flexibility to pursue its own growth strategy as the world's leading eye care devices company," said Vas Narasimhan.