Novartis confirms Alcon eye care unit spin off next month

Novartis has finalised plans for the long-awaited spin-off of its Alcon eye care business, announcing that the new company will list on April 9.

The Swiss pharma has approval for listing on the SIX Swiss Exchange and the New York Stock Exchange, adding that Alcon is expected to list on Switzerland’s SMI blue-chip stock index on its first trading day.

Alcon will have secured debt financing of $3.5 billion, adding that Bank of America Merrill Lynch and UBS were advising Novartis on the transaction.

Each Novartis shareholder will receive one share for every five Novartis shares or American depositary receipts that they hold at the close of business on April 8.

The newly listed firm expects to pay a dividend in 2020 and will focus on ‘bolt-on’ acquisitions to help boost operating margins to the mid-20% from the high-teens.

Under the leadership of new CEO Vas Narasimhan, Novartis is trying to move on from strategies developed by previous CEOs, such as his immediate predecessor Joe Jimenez, and before that Daniel Vasella.

Narasimhan’s idea is to rethink Novartis as a pure-play R&D based pharma company, underpinned by an investment in digital technology, and has decided that the surgical devices and contact lenses made by Alcon are surplus to requirements.

Novartis bought Alcon from Nestlé for $52 billion in 2011, as CEO Joe Jimenez, guided by then chairman Vasella, sought to build the company into a European healthcare business following the model adopted by Johnson & Johnson.

But Alcon proved difficult to manage and required continual investment to reverse falling sales and losses.

With the Alcon issue now resolved, the speculation is mounting about Novartis’ other key business unit – its biosimilars and generics arm, Sandoz.

Sandoz’s CEO, Richard Francis quit last week, prompting speculation that the unit will be the next to be spun off under Narasimhan’s new strategy.

Novartis is already de-linking Sandoz from its main business as part of a multi-year transformation that clears the way for a decision on its future.