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Novartis AG buying 25 percent of Fort Worth-based Alcon

The Swiss drug company Novartis AG will buy 25 percent of Fort Worth-based Alcon for $11 billion, and could become the eye-care giant’s majority owner in a few years.

Under the deal between Novartis and Nestle, the Swiss food company that currently owns 77 percent of Alcon, Novartis receives the option to acquire the rest of Nestle’s stake — another 52 percent — between January 2010 and July 2011 for up to $28 billion.

Alcon Chief Executive Cary Rayment said Monday that the investment reflects Alcon’s accomplishments as a leader in ophthalmology. No immediate changes are planned at Alcon, which employs more than 3,100 workers at its campus on the city’s south side.

“Clearly, from an Alcon standpoint, Nestle’s been a great owner and shareholder, and has supported our growth over the years,” Rayment said. “Now, we’re moving to a phase where we would have certainly the support of a leading global pharmaceutical company.”

Alcon, which was founded in Fort Worth, is the world’s largest eye-care company, producing drugs, surgical equipment and consumer products. Now incorporated in Switzerland, the company has more than 14,000 employees in 75 countries. It has seen brisk sales growth across its product segments in recent years, generating $5.6 billion in sales in 2007 and profits of $1.6 billion.

“We think it’s a superb opportunity to acquire a majority in the world’s largest eye-care company, which has really shown a great performance in the recent years,” said Dr. Daniel Vasella, Novartis’ chief executive.

Alcon went public in March 2002 when Nestle spun off about 25 percent of its shares.

The deal with Novartis would add two members to Alcon’s board of directors, one selected by Nestle and the other by Novartis.

“It’s pretty much business as usual, in that Alcon remains a publicly traded company,” Rayment said. “Our strategy, our structure, our operations remain the same.”

Nestle spokesman Francois-Xavier Perroud told The Associated Press that the deal will not lead to job cuts.

“I don’t suspect it will have any measurable impact on the human resources of Alcon, especially since they are active in areas in which Novartis quite obviously isn’t,” he said.

Rayment said it’s too early to say what changes, if any, would be made at Alcon if Novartis follows through on becoming its majority stakeholder after 2010.

“Clearly, Alcon’s management and Novartis management will work together, looking at the opportunities, and make the appropriate decisions at that time,” he said.

Vasella told analysts on Monday that Alcon would be consolidated fully into Novartis if the second batch of shares are bought.

That could entail a purchase of the remaining 23 percent of shares from minority owners, he said. Or it could involve a different kind of transaction, such as integrating Novartis’ contact lens unit into Alcon’s operations.

“Everything is theoretical,” Vasella said. “Right now, these are separate businesses. And we are just a minority shareholder.”

Nestle chairman and chief executive Peter Brabeck-Letmathe said the deal was good for his company’s shareholders and that Novartis’ “activities are closely aligned with its own business.”

Brabeck-Letmathe on Thursday will hand over the CEO role to Paul Bulcke, who currently heads Nestle’s business in the Americas.

Nestle, which owns brands such as Nescafe, Perrier and Dreyer’s, has been spinning off its non-food businesses in recent years, while expanding its footprint in the areas of nutrition, health and wellness.

Last year Nestle bought the medical nutrition and Gerber baby foods units of Novartis for about $8 billion.

“These three deals are not connected, but they show that companies concentrate on what their real field of competence is. In our case it’s clearly food and nutrition, and in Novartis’ case it’s pharmaceuticals,” said Perroud.

Nestle said it would use the proceeds from the sale of its Alcon shares to reduce debt, buy back more of its own shares and support acquisitions in line with its focus on food, diet and lifestyle products.

This article includes material from The Associated Press.

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