Alcon is eye candy for Nestle

Swiss drugmaker Novartis is, as expected, exercising an option to buy a 52 percent stake in world-leading eye care firm Alcon from Nestle. It is paying $28.1 billion for Nestle’s stake, bringing its holding to 77 percent, and aims to buy out the remaining 23 percent of the company held by minority shareholders for $11.2 billion. What’s raising eyebrows is the offer of 2.80 Novartis shares for each remaining Alcon share, which amounts to just $153 per share compared with the $180 agreed with Nestle.

Novartis already owns CIBA Vision, the contact lens business, and is ogling an enlarged eye care business with pro-forma 2008 net sales of $8.5 billion. Analysts say it will ultimately need to offer minority shareholders more to get them on board.

What might be more eye-catching in this deal is what it could mean for another one. All cashed up, might Nestle – better known for KitKats than contact lenses – wade into the Cadbury deal, giving suitor Kraft’s bid some serious competition?

Nestle said the deal would allow it to launch a new $9.64 billion share buyback program. While Nestle has indicated it is only in the M&A market for smaller deals, that kind of money could well wind up burning a big hole in its pocket, one that is a couple of billion bigger than the $16.2 billion offer Kraft already has on the table.

DealZone Daily

The New Year starts with a massive — though widely expected — deal as Novartis (NOVN.VX) says it plans to buy the rest of eye-care group Alcon (ALC.N) for almost $40 billion. The seller is Swiss food group Nestle, which as it happens is sometimes mooted as a rival for  Kraft’s (KFT.N) hostile 10 billion pound bid for Cadbury (CBRY.L). The British chocolate maker’s shares nudge up 4 pence to above 800 pence after media reports that Kraft is set to raise its offer. But markets were expecting a higher bid anyway.

And shares in Japan Airlines Corp (JALSF.PK) jump 31 percent as the country’s government looks to secure funds to prevent the carrier from running out of cash.

For more on these and other deal-related stories from Reuters, click here.

In other media:

National Australia Bank (NAB.AX) is gearing up for a takeover of nationalised British lender Northern Rock (NRKx.L) and has held a “beauty parade” of potential advisers on the deal, British newspaper The Observer reports.

DealZone Daily

“Saab story ends” we wrote on these pages last week. Now it has begun again, after Dutch luxury carmaker Spyker raised a last-minute bid over the weekend. It looks as if there are other options, with General Motors saying it will look into several new expressions of interest for its Swedish unit. That’s only two days after it said it would start an orderly wind-down.

The London Stock Exchange (LSE.L) is buying 60 percent in Turquoise, its rival launched by a group of investment banks with a lot of fanfare two years ago. The centuries-old bourse will merge Turquoise with Baikal, its dark pool platform.

Kraft’s (KFT.N) hostile bid does not reflect Cadbury’s (CBRY.L) value, a significant number of big Cadbury shareholders thinks — that’s what Cadbury Chief Executive Todd Stitzer told my U.S. colleagues on Friday. ”It appears that the stand-alone value of the company has risen in the eyes of shareholders,” he said. Meanwhile, the New York Times writes that Britain is going “into an emotional tailspin” over the prospect of losing Cadbury. If that’s the case, they’re hiding it well — must be the stiff upper lip.

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Nomura (8604.Tis to buy Tricorn Partners, a London corporate finance boutique. The Japanese bank is making the acquisition to beef up its corporate broking business. It is currently corporate broker to eight British companies including Tesco. The value is not disclosed.

Abu Dhabi’s sovereign fund is serious about mitigating losses it faces from its purchase of securities in Citigroup (C.N) in 2007. Abu Dhabi Investment Authority has filed an arbitration claim against the US bank alleging  misrepresentation. It wants Citigroup to rescind on the investment agreement or pay more than $4 billion in damages.

In Australia, BHP Billiton (BHP.AXoffers to buy Queensland’s coal freight business. The state government of Queensland last week announced plans to float the business, a move which wasn’t popular with miners and rival rail groups who had expected the business to be separated.

Nastiness in the mix for Kraft’s hostile Cadbury bid?

Rather than talk about sweetening its 789 pence-per-share offer for Cadbury — say, to the 820-850 pence level analysts think is needed — Kraft is urging shareholders to take a long hard look at Cadbury’s revenue growth targets, margin goals and other metrics measuring management’s effectiveness. That’s a none-too-subtle step away from the argument that the merger would create mounds of value.

It makes sense that Kraft CEO Irene Rosenfeld would not want to make Cadbury look like it’s worth more than she wants to pay. If Kraft is going to convince anyone it shouldn’t raise the bid, regardless of whether a rival rides in from Hershey or elsewhere, it has to appear willing to walk away rather than go back to the bank.

Cisco, which recently bought Tandberg, is widely regarded as having one of the most savvy in-house merger teams among big corporate predators. Though its bid for the videoconferencing company was hostile, the prospect for a higher bid was always out there. So when it came, it was easy for everyone to accept. Cisco CEO John Chambers also took care to talk up the videoconferencing business as core to Cisco’s future.

DealZone Daily

British chocolate maker Cadbury (CBRY.L) ramps up its targets for sales and operating margins to show it’s worth more than Kraft’s (KFT.N) hostile $16.5 billion offer. It says it has seen interest from other bidders, but doesn’t mention them . Stock markets are unimpressed — Cadbury shares are up only 0.7 percent.

In the wrangling over Saab, Beijing Automotive Industry Holding Corp (0r BAIC) has said it has acquired some of the assets of the General Motors unit.

French insurer AXA (AXAF.PA) and Australia’s AMP Ltd (AMP.AX)  have raised their takeover offer for AXA Asia Pacific Holdings to $11.7 billion — a 16 percent rise. The two are keen to get their hands on different parts of the business. The French insurer is already the biggest shareholder in AXA Asia Pacific Holdings, and also its parent company.

Kraft unwraps bid

Kraft Foods posted its offer to Cadbury shareholders with terms unchanged on Friday, triggering a two-month, 10.1 billion pound takeover fight for the British chocolate company.
Read the story here

The formal bid matches its indicative offer, worth 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share, which the U.S. food giant said valued Cadbury at 713 pence.
For the full prospectus, go to Kraft’s transaction website. Link here

A rival bidder could reveal its hand any time within the next 60 days, under UK takeover rules. Italy’s Ferrero and U.S.-based Hershey are considering making a bid. Analysts say the two could team up.

Kraft’s anti-climax?

North American food giant Kraft is due to post its offer documents to Cadbury shareholders by Dec. 7, but this latest milestone in the 10 billion pound takeover saga may turn out to be more damp squib than giant Toblerone.

Kraft could indeed post the documents ahead of time as the Times reported this week. With no significant changes to the structure or value of the offer anticipated, the event is unlikely to captivate or move the markets, however.

Keeping the terms exactly the same would be typical behaviour for Kraft, as we said last month here. The company formalised its indicative offer in the hope that no rival bidders would emerge to pressure it to up its bid. Despite Wispas — sorry, whispers — about Hershey, Nestle, and Ferrero, no rival has come forward yet.

Hostilities resume

wwwreuterscomboxing1(Acquisitions Monthly) The past year has seen the return of the hostile bid approach, requiring advisers to deploy their full range of defensive skills to fend off such opportunistic offers, or force the bidders to raise their price.

Finding the right balance between those two goals can be notoriously tricky. In theory, National Express defended itself successfully from a series of approaches this year, initially from transport rival First Group then from private equity group CVC in conjunction with major shareholder the Cosmen family and latterly Stagecoach.

However, this victory looks Pyrrhic. The company’s share price is 25% below the high point it reached during the offer period. Added to that, the board also now faces a disgruntled shareholder base. Hedge funds are seeking quick profits while its largest investor is at strategic odds with the directors and unwilling to support a rights issue.

DealZone Daily

Shares in banks, builders and companies part-owned in the Middle East fall around the world, and investors seek safety in government bonds on worries about Dubai’s ability to pay its debts.

Meanwhile, global miner BHP Billiton (BHP.AX) dismisses talk that rival Rio Tinto (RIO.AX) is baulking at a proposed $116 billion joint venture in iron ore, insisting the two are close to a binding agreement.

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