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Swiss law expert counters Alcon Independent Director Committee’s legal position in proposed merger with Novartis


Novartis announced today that a Swiss corporate law expert reviewed and validated the Novartis legal position in the proposed merger with Alcon Inc under the Swiss Merger Act. The review was conducted following the publication of the legal opinion issued by the Alcon Independent Directors Committee (IDC) on June 28, 2010. The Swiss legal expert confirmed that the opinion and the actions of the Alcon IDC are not consistent with Swiss law.

The Novartis merger proposal with Alcon was announced on January 4, 2010. Novartis maintains that simplifying the ownership of Alcon is in the best interests of the stakeholders, and ultimately the patients who benefit from the products.

“Merger transaction decisions must be made by the full board and cannot be subject to a veto right by a sub-set or committee of directors,” according to Professor Dr Peter Nobel, law professor at the University of Zurich and professor emeritus at the University of St Gallen, Switzerland and a recognized expert in the areas of financial and corporate law. “The Alcon IDC’s assertions that IDC approval is required to approve a merger with Novartis is inconsistent with well-accepted principles of Swiss law.” He further states: “There is appropriate protection of minority shareholders under Swiss law. This includes a review of the proposed exchange ratio by a fairness opinion, as well as the judicial ‘class action-like’ appraisal claim remedy.”

The opinion by Professor Nobel further confirms the Novartis view that directors who are nominated by Novartis are not conflicted solely as a result of being nominated by a majority shareholder. Accordingly, neither Swiss law nor Alcon Organizational Regulations provide a valid basis for considering Novartis-nominated board members as conflicted solely as a result of having been nominated by a majority shareholder.

Professor Nobel also concludes that an Alcon board that consists of Novartis-nominated directors can validly approve a merger transaction with a majority shareholder and as such, would not be rendered void under Swiss law. This means that the IDC’s stated strategy of blocking an approved merger would not prove successful under Swiss law. Equally, Novartis is allowed to vote its Alcon shares at an Alcon shareholders’ meeting approving the merger.

In addition, the IDC’s view, that the current version of the Alcon Organizational Regulations cannot be amended by the full board, is not in line with the duty of the board under Swiss law to adopt and amend the organizational regulations. In particular, the board is not prevented from changing such regulations pending any corporate transaction. “This is not about moving goalposts during a game – we are concerned with Swiss Company law and not with a sporting event,” Professor Nobel added.

On July 8, the IDC issued a press release announcing the creation of an irrevocable litigation trust, funded solely by $50 million of Alcon assets. The actions by the members of the IDC in creating this litigation trust are inconsistent with Swiss law and are not in the interests of Alcon, possibly creating a breach of fiduciary duties by these board members. In addition, the IDC members have thereby assumed legally binding fiduciary duties to act in the specific interests of the trust and of the minority shareholders alone. These duties are in direct conflict with the IDC members’ fiduciary duties to act in the interest of Alcon Inc as a whole.


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