Nestle And Alcon
Nestle and Alcon – The value of a Listing
The case talks about Nestle which is the world’s largest food company trying to assess whether a part of
Alcon which is one of its major non-food holdings should be carved out for a public listing or not. There were many reasons mentioned in the case for this carving out like the heads wanted the market to reflect the full value of Alcon and only food and beverage analysts follow Nestle group and so on. The case tries to evaluate whether it was needed at first, if yes then what impact would such an event have on Nestle’s overall valuation? Then if they did go for an IPO, on which stock exchange should they list? Nestle is a
Swiss firm listed in Zurich and Alcon is operationally based in United States. There are 4 choices given to this and the pros and cons to come up with the listing choice are provided.
Swiss Listing
Pros
Simple to implement, no legal adjustments
Low Administrative Costs – same reporting schedules and investors’ announcements
Cons
Swiss market Size – poor visibility and scarcity of liquidity Few large Institutional Investors expert in
Ophthalmology
More than half operations and sales are in the US
US Listing
Pros
Attract US Investors – Liquidity availability
Closer to headquarters, R&D Centre and primary market
Higher visibility
Cons
No more royalty deductions
High costs of reorganization
Duplication of administrative costs
Dual Listing
Pros
Achieve investors of both Swiss and US thus provides the biggest market among the four listing methods
Be able to target the specialty pharmaceutical investors
Cons
Expensive procedure – It includes Issuing costs and different Accounting Systems
Inconsistent Security Laws
Flashback Effect
ADR
Pros
Be familiar with most US institutional investors, thus helps in targeting sizable American Market.
Less requirement than direct issuing.
Easy to trade for investors
Cons
Attract international diversified funds instead of the specialty pharmaceutical investors
Be
The case talks about Nestle which is the world’s largest food company trying to assess whether a part of
Alcon which is one of its major non-food holdings should be carved out for a public listing or not. There were many reasons mentioned in the case for this carving out like the heads wanted the market to reflect the full value of Alcon and only food and beverage analysts follow Nestle group and so on. The case tries to evaluate whether it was needed at first, if yes then what impact would such an event have on Nestle’s overall valuation? Then if they did go for an IPO, on which stock exchange should they list? Nestle is a
Swiss firm listed in Zurich and Alcon is operationally based in United States. There are 4 choices given to this and the pros and cons to come up with the listing choice are provided.
Swiss Listing
Pros
Simple to implement, no legal adjustments
Low Administrative Costs – same reporting schedules and investors’ announcements
Cons
Swiss market Size – poor visibility and scarcity of liquidity Few large Institutional Investors expert in
Ophthalmology
More than half operations and sales are in the US
US Listing
Pros
Attract US Investors – Liquidity availability
Closer to headquarters, R&D Centre and primary market
Higher visibility
Cons
No more royalty deductions
High costs of reorganization
Duplication of administrative costs
Dual Listing
Pros
Achieve investors of both Swiss and US thus provides the biggest market among the four listing methods
Be able to target the specialty pharmaceutical investors
Cons
Expensive procedure – It includes Issuing costs and different Accounting Systems
Inconsistent Security Laws
Flashback Effect
ADR
Pros
Be familiar with most US institutional investors, thus helps in targeting sizable American Market.
Less requirement than direct issuing.
Easy to trade for investors
Cons
Attract international diversified funds instead of the specialty pharmaceutical investors
Be