US - The City of Westland Police & Fire Retirement System filed a class action lawsuit against Alcon, Novartis and Nestlé, alleging that Novartis' recent public offer for Alcon discriminated minority shareholders.
The suit is the second in as many weeks. Last week, the Massachusetts Bricklayers and Masons pension fund filed a lawsuit against Novartis, Alcon and Nestlé over the deal. (Global Pensions, January 13, 2010)
Novartis announced on January 4 that it had exercised an option to purchase 52% of Alcon's shares from Nestlé for approximately US$180 per share in cash. This transaction would give Novartis a 77% stake in Alcon.
According to law firm Grant & Eisenhofer, co-interim class counsel in the case, Novartis said it would make a public non-cash offer for the remaining 23% held by minority shareholders, but only for $148.70 per share.
Grant & Eisenhofer added Novartis had not obtained the approval of Alcon's independent directors, but "is poised to push through the transaction regardless. This would violate Alcon's organisational regulations, which require such a transaction to be approved by the independent directors on Alcon's board."
In a statement circulated after the lawsuit was announced, the Alcon Independent Director Committee said the price and other terms proposed by Novartis were "grossly inadequate" and the financial analysis upon which Novartis' unilateral proposal was based was "fundamentally flawed".
The Committee's chairman Thomas Plaskett said: "The Committee strongly believes that the underlying historical record and management's expected future financial performance of Alcon justify a significantly higher price than that reflected in the current proposal by Novartis. Moreover, minority shareholders have rights accorded to them that must be respected."
A spokesperson for Grant & Eisenhofer said the legal action was proceeding as Alcon had not formally refused the offer.
The complaint against the three Swiss-based companies and several Alcon directors was filed before the US District Court in New York.
"This offer seeks to bypass Alcon's contractual protections of its minority shareholders, and force an unfair price on them," says Grant & Eisenhofer managing partner Jay Eisenhofer. "Alcon's public shareholders are unable to protect themselves from this inadequate offer, due to the control Novartis and Nestlé exert over the company."
Alcon declined to comment. Novartis and Nestlé did not immediately reply to emails and calls seeking comment.