All eyes are now on an assessment by an independent committee of Alcon directors, widely expected to say the Novartis price is too low. But if needs be, the Swiss drugmaker could simply replace the committee members to force through a deal.
The question is: Is the offer adequate? And there I think there is still some room for improvement, said Andrew Weiss, analyst at Swiss bank Vontobel.
Novartis is offering 2.8 of its own shares for each outstanding share in Alcon, valuing the outstanding 23 percent of the U.S. group at about $147 per share, a discount to its closing price on Tuesday of $153.46.
Both are significantly lower than the average $168 per share Novartis is paying to buy a 77 percent stake from Nestle (NESN.VX) and the $180 agreed for the purchase of the second tranche of that deal. Novartis bought the first, 25 percent stake for $143.18 per share.
$168 -- that caps the discussion as to how much they should be rewarded, said Weiss. If the board does not comply then I think Novartis are going to say: 'That's the law.'
Alcon, though listed in New York, is incorporated in Switzerland where the law does not require that any squeeze out of minorities is concluded at the same price paid for the majority.
Once the Nestle deal is concluded Novartis could -- as majority shareholder -- simply replace the independent Alcon directors to force through the deal.
Some investors have already cried foul and a Masschusetts pension fund has sued Novartis, Alcon and Nestle over the deal.
Novartis is using its de facto status as Alcon's majority and controlling shareholder to ram the proposed merger through, Massachusetts Bricklayers and Masons Trust Funds said in its court filing.
The proposed merger, however, is the very antithesis of an entirely fair transaction, the $95 million pension fund added.
But such lawsuits cannot actually prevent the merger and most analysts expect Novartis will end up paying a touch more than its initial bid, originally worth some $11.2 billion, to push the deal through and avoid more bad publicity.
One source familiar with the deal, who declined to be named due to direct involvement in the transaction, said replacing the independent directors was not a comfortable situation and a small increase could avoid a lot of trouble.
Ultimately I think Novartis can push through the merger, the source said. That could be -- a lowball bid to give the possibility to the committee of independent shareholders a chance to play their role.
The Alcon deal could mark the swansong of two senior Novartis executives, CEO Daniel Vasella and finance chief Raymund Breu, keen to push through the transaction at more favorable terms to secure their legacy.
That would echo last year's events at Novartis' Swiss rival Roche (ROG.VX), whose $47 billion buyout of U.S. biotech Genentech marked a changing of the guard from experienced hands to younger Chief Executive Severin Schwan.
The normally reserved Breu -- who has worked for Novartis and one of its predecessors, Sandoz, for some 35 years -- is due to retire in March and has had an unusually high profile since the deal was announced earlier this month.
There is also speculation that the more garrulous Vasella, a medical doctor who is one of the longest-serving leaders in the European pharmaceutical industry, could soon hand over the reins to one of the group's younger and up-and-coming executives.
They can't totally ignore the fact that Alcon is a U.S.-listed company, said Helvea analyst Karl-Heinz Koch. They could in theory push it through, but they may ultimately raise the price to the average price Nestle received.
(Editing by Jon Loades-Carter)