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Alcon To Be Spun Off By Novartis Along With A $5 Billion Share Buyback

Alcon To Be Spun Off By Novartis Along With A $5 Billion Share Buyback
With the focus of Novartis now shifting to prescription drugs, the Swiss company has planned the spin off its Alcon eye care business among shareholders as well as a share buyback program of up to $5 billion in stock.
Ever since Alcon was bought for $52 billion in 2011it has presented problems for the company. 
The company’s Chief Executive Vas Narasimhan did not provide any valuation of the company. The earlier CEO Joe Jimenez had however once estimated the company to be valued between $25 billion to $35 billion.
The ongoing recovery of the company however can influence the valuation, said analysts at Bank Vontobel, adding that the valuation could be between $15 billion and $23 billion.
In order to prevent falling sales and losses, large investments had to be made by Novartis in Alcon. The company is now showing signs of a turnaround with growth in revenues and a $90 million operating profit in the first-quarter of the current year.
The main listing and headquarters of Alcon would be in Switzerland once after it has been spun off from Novartis and distributed among investors. The company reported $7 billion in annual sales.
"Details of the transaction and its proposed valuation remain opaque but for Novartis shareholders, this should at last feel like a win," said Andy Smith, analyst at Edison Investment Research. "Actually, two wins" with the share buyback, he added.
Novartis has moved away from its vaccines, dumped its animal health business after the exit of Vasella, the former CEO and chairman in 2013. This year, the company started a joint venture with GlaxoSmithKline for around $13 billion in the consumer health segment.
"A company like ours needs to focus our capital in our area of strength which I believe is innovating world class medicines and I'd like to build our strength in digital and data technologies," Narasimhan told reporters.
French-based Advanced Accelerator Applications (AAA) and U.S.-based Avexis were bought last year by Novartis for $8.7 billion and $3.9 billion respectively which is a part of the strategy of the company being more focused on developing specialized treatments since last year. the two acquisitions gave the company a platform to enter the gene therapy and radio-pharmaceuticals segments.
Narasimhan said that the company will pursue the strategy of bolt-on acquisitions which could bolster technology or provide novel medicines to the company with the potential to transform treatment.
"We have a strong balance sheet, we have strong free cash flow, so we are able to still execute our M&A we've done with AAA and Avexis," he said.

Christopher J. Mitchell

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