Novartis plans to spin off its Alcon eye care business to shareholders and buy back up to $5 billion in stock as Chief Executive Vas Narasimhan refocuses the Swiss group on prescription drugs.
Alcon, a legacy from former Novartis boss Daniel Vasella's empire building, has been problematic since it was bought for $52 billion in 2011. Narasimhan declined to give a valuation for the business on Friday, although his predecessor Joe Jimenez once estimated it at only $25 billion to $35 billion.
Bank Vontobel analysts, however, said it could be worth between $15 billion and $23 billion, adding that its ongoing recovery would influence the final price.
Novartis had to make massive investments in Alcon to reverse falling sales and losses, although revenue is again growing and it posted a $90 million first-quarter operating profit.
Once it is spun off from Novartis and distributed among investors Alcon, which has $7 billion in annual sales, will have its main listing and headquarters in Switzerland, where it would be a contender for the benchmark Swiss Market Index.
Novartis plans to seek shareholder approval for the spin-off, which is due to be completed in the first half of 2019, in February. The buyback is due to wrap up by the end of next year.
Shares in Novartis were up 3.3 percent by 0935 GMT as investors welcomed the Alcon separation and share buyback.
"Details of the transaction and its proposed valuation remain opaque but for Novartis shareholders, this should at last feel like a win," said Andy Smith, analyst at Edison Investment Research. "Actually, two wins" with the share buyback, he added.
Narasimhan, a Harvard-trained U.S. doctor, is pressing ahead with Jimenez's reversal of a decade of expansion under Vasella, the former CEO and chairman. (https://reut.rs/2KvMKPK)
Since Vasella's departure in 2013, Novartis has exited vaccines, dumped its animal health business and this year unloaded its consumer health joint venture with GlaxoSmithKline for around $13 billion.
"A company like ours needs to focus our capital in our area of strength which I believe is innovating world class medicines and I'd like to build our strength in digital and data technologies," Narasimhan told reporters.