The Trouble Is They're Facing a Bazooka

Alcon's (NYSE: ACL  ) Independent Director Committee (IDC) today added one more arrow to its quiver in its fight to hold off Novartis (NYSE: NVS  ) .  

The problem is, arrows might not be enough against Novartis' bazooka.

Novartis will soon be Alcon's majority shareholder after closing its purchase of shares currently owned by Nestle. Once it owns 77% of the company, Novartis plans to fold the eye-care specialist into the company, trading Alcon shares for ones in Novartis; both companies are based in Switzerland. At the time of the announcement, the share swap was valued at less than what Alcon was trading for and well under what Novartis was paying Nestle.

The IDC announced today that professor Hans Caspar von der Crone has sided with it in its assertion that Novartis needs the IDC's approval to get the deal done. Now, I'm no expert in Swiss law, but as far as I can tell, the professor doesn't have any power. He may certainly be an expert, but opinions are a dime a dozen. OK, so legal ones probably cost more, but you get my point.

Novartis' legal ability to impose its will on Alcon's minority shareholders will probably be decided by a court, not by a law professor who happens to have been hired by the IDC to render his opinion (though his opinion would likely be considered).

That is, if Novartis lets it go that far. Novartis could just up its offer to make the problem go away, which wouldn't necessarily be a bad idea, as many of the shareholders are probably Alcon employees. No need to start the new relationship off on the wrong foot, after all.

But if Novartis continues to strong-arm Alcon's minority investors, I have a hard time feeling too sorry for them. Anytime you buy less than 50.1% of a company's shares -- that would be "always" for me and for most of you -- you're depending on others to make the best decision for you. That's not always the case -- BP's (NYSE: BP  ) board suspended its dividend, Google (Nasdaq: GOOG  ) repriced its employee stock options, the list goes on -- but it's something you have to live with if you're going to invest. Sometimes minority investors can make enough of a stink to get things done, as Carl Icahn has done with Genzyme (Nasdaq: GENZ  ) and Biogen Idec (Nasdaq: BIIB  ) recently, but we small investors just have to buy and hope for the best.

In the case of Alcon, minority shareholders have even less power because there's a supreme overlord -- currently Nestle, soon to be Novartis -- calling the shots. The shares owned by minority shareholders aren't worth as much because they don't come with the power that Nestle's majority block has. Whether Swiss courts will agree remains to be seen.