You Don't Need Your Contacts In to See This Deal

There's nothing like a 21-month lead-in to make an acquisition rather anticlimactic, even if the total price reached nearly $50 billion -- halfway between the size of Merck's (NYSE: MRK  ) acquisition of Schering-Plough and Pfizer's (NYSE: PFE  ) purchase of Wyeth.

When Novartis (NYSE: NVS  ) purchased its initial 25% of eye-care specialist Alcon (NYSE: ACL  ) from Nestle in 2008, the deal included a call option for Novartis to buy Nestle's remaining 52% interest in Alcon for $180 per share. The deal also included a put option for Nestle to force Novartis to buy its shares of Alcon for a 20.5% premium, but not more than $181 per share. With Alcon trading well above $150, the level that Nestle would get full value, one of the companies was bound to exercise its option when the window opened this year.

Novartis decided it would act first and announced today that it'll pay $28.1 billion for Nestle's additional 52% stake. Nestle may use the proceeds to enter a bidding war with Kraft (NYSE: KFT  ) for Cadbury (NYSE: CBY  ) . Using its new nest egg to buy some chocolate ones -- how sweet!

Speaking of sweet deals, Novartis seems to be trying to get one from Alcon's current shareholders. The company is offering minority shareholders 2.8 shares of Novartis for every share of Alcon they own. Do the math based on the last closing price for Novartis, and that works out to less than $153 per share -- less than what Alcon closed at and well below the $180 that Novartis is paying Nestle for the shares. Without much leverage, the minority shareholders may be forced to take what they can get.

Even if Novartis isn't able to wrangle away the remaining shares so cheaply, the deal should work out for the company. It'll inherit a solid selection of eye-care products -- both prescription and over-the-counter, such as contact lens solution. The latter follows in the footsteps of sanofi-aventis' (NYSE: SNY  ) acquisition of Chattem last month. Add that to Novartis' large generic-drug division, Sandoz, and it's looking like a nicely diversified health-care giant that can weather any future storms.