Alcon's independent directors continued their battle to fend off Novartis' avid interest in acquiring the eye-care company, once again rejecting its current bid as too low. The directors said that after consultations with their financial and legal advisors they found the Novartis proposal to be “fundamentally flawed” and “not in the best interests of Alcon and its minority shareholders.”

 

Chief among the directors' complaints is that the current Novartis proposal offers “grossly inadequate” compensation to minority shareholders, who would be paid less per share for their stake in the company than the controlling shareholder, Nestle.

 

“The Novartis proposal would inequitably and unfairly distribute that value to its two largest shareholders, which is neither befitting a company of Novartis' stature nor equitable to the Alcon shareholders, many of whom have been long-term investors since the initial public offering in 2002,” say the directors in a published letter.

 

The independent directors committee also said that it believes Swiss law and Alcon's internal regulations protect the rights of minority shareholders by requiring that it approve a proposed merger with Nestle. Such legal leverage may prove important if Novartis exercises an option it claims to have to repopulate the board with directors friendly to the transaction.

 

For Novartis, acquiring Alcon offers an opportunity to capture a third of the $26 billion global eye-care market. Novartis has already established beachheads in that market with its Ciba Vision contact lens unit and Lucentis, its drug for age-related macular degeneration, a leading cause of vision loss in Americans 60 and older.

 

Novartis has not publicly responded. Further information about the spat and its resolution may emerge during Novartis' fourth quarter and 2009 year-end earnings call, scheduled for January 26.