By MATTHEW CURTIN
Clarity of vision is a wonderful thing. But plucky investors who bought shares in eye-care specialist Alcon for as much as $166 in the past month are ruing their lack of it today. Novartis, as expected, is taking control of the company by exercising a call option with current 52%-owner Nestlé at $180 a share. Paying that hefty price reflects the risks facing Novartis’s core pharmaceutical business. UBS reckons 26% of its 2008 revenue is vulnerable to patent expiration by 2015.

But far from being on the receiving end of the same rich offer, Alcon’s minority shareholders are being offered just $153 in stock. There is little they can do. Alcon is incorporated in Switzerland, like Novartis, so Swiss merger law applies. And that gives little protection to minority holders.

They can’t reject the bid if they don’t like it. Instead, the price only has to be “equitable” to shareholders in the two companies agreeing on the deal, in this case Novartis and Alcon. It needs approval by a simple majority of each company’s directors and two-thirds of shareholders. These will be formalities given Novartis will own 77%, including the Nestlé stake. The only option for disaffected minority shareholders is to wait for the deal to close and claim in court that the deal wasn’t equitable.

That looks tough. While minority holders probably could have forced a higher price if they had proper protections, it is hard to argue that $153 a share is unfair. It puts Alcon at 16 times forecast earnings before interest, taxes, depreciation and amortization, and 21 times earnings per share. That is a wide premium to the 10 times and 15 times multiples for the medical-equipment sector, and above the 12 times and 20 times at rival Allergan. Minority holders would be right to kick up a fuss to get more, not least because they are being paid in Novartis shares. But they shouldn’t hope for more than a small bump to silence them.

Write to Matthew Curtin at matthew.curtin@dowjones.com

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