Novartis is planning to acquire 25 percent of Alcon from Nestle, the world’s largest eye-care company for about 11 billion dollars. The next deal will give the right to buy Nestle’s remaining 52 percent shares for about 28 billion dollars in another 2 years. The two-stage acquisition would give Novartis 77 percent of the total shares for about 39 billion dollars. Alcon’s annual sales last year were around 5.6 billion dollars and the operating income was 1.9 billion dollars.

The brands of Alcon include Vigamox antibiotic solutions, Travatan for contact lenses and Opti-Free products used for maintenance of contact lenses. Novartis already has an ophthalmic and contact lens business and it is expected that the acquisition would grow this division rapidly. Alcon spent nearly 564 million dollars on R&D last year and about 3.5 billion dollars is about to be invested in 15 late stage projects. Novartis would finance the first deal with short term debt and its internal cash reserves. It is believed that financing for the second step would be derived from further external borrowing and constant cash generation. On the other hand, Nestle stated that from the deal it can now seek acquisitions more than its fixed ceiling of 2 billion dollars annually.