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Novartis shares fell 1. Alcon shares opened 1. Nestle, the world's largest food group, said the transaction would have a positive effect on its earnings per share. The deal will streamline Nestle, which has long described its stake in Alcon -- which makes medical devices and medicines for eye care as well as contact lens care products -- as financial and said it "clearly has financial punch" for acquisitions with the Alcon proceeds.
Novartis said it would finance the purchase of the first stake in Alcon from its cash reserves and external short-term financing. The sale of the Alcon stake, proceeds from which would be used to reduce debt, comes just before Nestle's annual shareholder meeting on Thursday.
Outgoing chief executive Peter Brabeck, who led a string of acquisitions to expand Nestle's health focus, is due to hand over the reins to new CEO Paul Bulcke. Investing Club. Europe Asia. Positive for Nestle Nestle, the world's largest food group, said the transaction would have a positive effect on its earnings per share. Shares in Nestle closed 1 percent higher at Premium Digital includes access to our premier business column, Lex, as well as 15 curated newsletters covering key business themes with original, in-depth reporting.
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Not the questions you were looking for? Additionally, the conglomerate structure brings lower transparency, higher complexity, and control costs, which usually has adverse effects on valuations. Gesparal is already a separate entity in which Nestle only holds a minority stake, so the main issue is with Alcon. In order to make dissolve the discount, 3 options prevail: selling Alcon, spinning it off, or carving it out.
Selling would mean to sell the whole subsidiary or its assets, ideally at the fair value. Nestle could choose to distribute the cash to its shareholders or reinvest in its core business unit. If many shareholders opt to sell their shares though, the share price will plunge in the Additionally, there is no price established yet in the market for Alcon, which increases uncertainty.
In a carve-out, only a part of the company is sold. Nestle plans on selling a minority stake by listing Alcon, which would imply a minority discount to the share price. However, a carve-out would allow reducing the conglomerate discount issues not completely solve them since Nestle is still invested in the Ophthalmic industry while keeping control and establishing a price in the market. Often carve-outs are followed by complete divestitures as a next phase, to reduce uncertainty. The main considerations in deciding are: how to appeal to the right investors and the costs of each option.
It would, however, also increase costs by mandating to follow different accounting rules and reporting cycles. Incorporating Alcon in the US is not an option due to tax considerations. The dual listing would be problematic since the company might not be big enough to sustain liquidity for both markets. Considering all these implications, the best option might be to list Alcon in the US but as an officially Swiss company tax considerations.
Unlock Case Solution Now! Upon purchase, you are forwarded to the full solution and also receive access via email. Get access to this material, plus much more with a free Educator Account:. Already registered? Sign in. In the process, students are challenged to wrestle with the valuation of a conglomerate, the tradeoffs involved in listing in the United States versus Europe, and the incentive and tax consequences of that listing decision.
Dec 8, Revised: Apr 26, Brought to you by:. Main Case Bestseller. Overview Included Materials Related. Learning Objectives To look at the valuation of a conglomerate, cross-border listings, and foreign subsidiaries. Discipline: Finance. Subjects: Asset management Conglomerates International business International finance Securities trading.
Get access to this material, plus much more with a free Educator Account:. Already registered? Sign in. In the process, students are challenged to wrestle with the valuation of a conglomerate, the tradeoffs involved in listing in the United States versus Europe, and the incentive and tax consequences of that listing decision.
Dec 8, Revised: Apr 26, Brought to you by:. Main Case Bestseller. Overview Included Materials Related. Learning Objectives To look at the valuation of a conglomerate, cross-border listings, and foreign subsidiaries. Discipline: Finance. Subjects: Asset management Conglomerates International business International finance Securities trading.
Beginning January Novartis formally announced it will be completing the exercise options for finishing purchasing the rest of Alcon and then promptly continue to exercise merger and takeover of Alcon. Alcon received regulatory approval to acquire the rights of Durezol emulsion in the US and the global rights, excluding Latin America, for Zyclorin from Sirion Therapeutics.
From Wikipedia, the free encyclopedia. American Based Eye Pharmaceutical Company. This article is about the medical company.
For other uses, see Alcon disambiguation. Traded as. Switzerland [1]. Surgical products Contact lenses Over-the-counter products. Operating income. Net income. Retrieved December 5, Securities and Exchange Commission. Retrieved The New York Times. Archived from the original on 6 January San Antonio Business Journal. Business Wire. March 29, Retrieved March 16, The Chief Executive Forum.
Archived from the original on April 9, Swissinfo in French. Wikimedia Commons has media related to Alcon.
Aug 18, · Abstract. In response to a perceived undervaluation by the capital markets, Nestle is considering divesting a part of its ophthalmology subsidiary, Alcon, and must decide on a . Dec 8, · In response to a perceived undervaluation by the capital markets, Nestle is considering divesting a part of its ophthalmology subsidiary, Alcon, and must decide on a . Aug 10, · Alcon which is one of its major non-food holdings should be carved out for a public listing or not. There were many reasons mentioned in the case for this carving out like .