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Alcon (ACL) Sets up trust for litigation between with Novartis to protect minorities

Alcon (ACL), world’s leading eye care company, independent director committee (IDC) has set up a $50 million litigation trust, intended to provide the financial means to commence, defend or maintain litigation relating to any transaction between Alcon and a majority shareholder, including the transaction contemplated by the merger proposal announced by Novartis AG (NOVN) (“Novartis”) on January 4, 2010.

Novartis agreed to buy Nestle’s (NESN) majority stake in Alcon and has made what Alcon’s independent directors regard as a lowball offer for the remaining 23 percent stake, prompting the IDC to put pressure on Novartis to raise its bid.

Novartis bought 25 percent of Alcon in 2008 and agreed in January to buy another 52 percent, which would bring its stake to 77 percent for a combined price of $39.3 billion. It paid Nestle an average of $168 per Alcon share.

Thomas G. Plaskett, Chairman of the IDC, said, “Novartis’ merger proposal is not only grossly inadequate to the minority shareholders of Alcon, which include its valuable employees, but also creates considerable legal uncertainty that could very likely result in significant litigation costs and delays in achieving merger synergies for both companies in the absence of a negotiated transaction. Given Novartis’ actions and statements to date, we unfortunately can ill-afford to assume that Novartis will voluntarily honor the fair process contemplated by Alcon’s organizational documents, Swiss law and established principles of good corporate governance. Therefore, we felt that it is necessary to take this step now to help ensure that the fair process is observed once Novartis completes the acquisition of Nestlé’s stake in Alcon.”

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