1. The listing of Alcon
DDIM 2010/2011
Group 7
Yuhan FANG
Yiqin REN
Yuanjun ZHOU
Chun ZUO
Alberto SEVERI
Elena BIANCO
Gabriele FALCONE
Roberto TOSCANO

2. What is Nestlé today
You probably already know all of this… But:
_with estimates of market share of 1,4 % of the food and
beverage industry and 2,6 % of the processed and
branded products to Nestlé,
_ with more than 250.000 people employed in 508
locations in over than 80 countries,
_ with a brand portfolio that includes:
by today, Nestlé is the world’s number one food company

3. What is Nestlè today
The non-food investments:
Nestlé is a minority partner (49%) in Gesparal, the holding company for the French
cosmetics company L’Oréal. This enables Nestlé to held the 26% of L’Oréal’s shares.
Wholly owned ophthalmology company.

4. What is Alcon today
Is the world’s leading ophthalmology company:
- net earnings of $331 mln
- sales of $2.5 bln
-about 11.000 employees in 75 countries
Although Alcon legally became a Swiss domiciled company after Nestlé’s
acquisition, top management and R&D offices remained in the US. More than
half of company sales and earnings are in fact generated there.

5. What if we tell you that…
The value of Nestlé can be increased
As today, the Enterprise Value of
the Nestlé as a conglomerate,
including Alcon and L’Oréal,
accounts for 97.500 USD.
A carve-out of Alcon, through an IPO, would increase this value –we’ll show you
how.
Furthermore, there are other important reasons that justify such operation.

6. Why carving out Alcon is beneficial
- Separation between food and non-food business:
increase awareness of the company value among both managers and investors
- Disclosure of Alcon’s real value
- Financial sustaining and downgrading avoidance
- Widening of customer base
- Investment perspective: make money
- Increasing of managerial motivation

7. Our evaluation
The carve-out of Alcon will increase the value of Nestlè conglomerate.
In order to show this we will:
- Calculate a proxy of the value of Alcon if it was independent from Nestlé,
- Calculate a proxy of the value of the food&beverage business alone, within Nestlé
- Sum these two values to the value of l’Oréal
- Compare this sum to the current enterprise value of Nestlé (97500 USD)
Both the proxies were calculated with the multiples EV/EBITDA; we also wighted
the obtained index with the enterprise value of the company in order to consider
the size of each company on the total industry.
We decided not to take into consideration in our analysis all the companies with a
low percentage of presence in the businesses (<60%) and the one with lacks of
data.

8. Alcon’s disclosed value
Out of Nestlé, Alcon would be evaluated in line with the other companies of
the pharmaceutical industry.
Here is the data we used to shape an average multiple index of the industry.
By multiplying this multiple times Alcon’s EBITDA we get a proxy of Alcon’s Enterprise
value:
25.1784 * 704.1556= 17729.4891 USD
We obtained this value by adding the amortization and
depretiation back to the operating income.

9. Nestlé F&B disclosed value
A similar approach should be applied to evaluate the Food&Beverage business of
Nestlé.
By multiplying the average multiple of the Food&Beverage industry times Nestlè’s EBITDA we
can get a proxy of Nestlè’s Enterprise value:
11.1331 * 6957.8444= 77462.1667 USD
We obtained this value by subtracting Alcon’s EBITDA from Nestlé’s one.

10. Value-added from the carve out
If we now sum everything…
We get 104291.6558 USD, which is 6791.6558 USD more than 97500 USD, the
actual value of Nestlé.
The carve out of Alcon should thus create about 7% more value.

11. Listing Alcon, but where?
Proven that the carve-out of Alcon increases the value of Nestlé conglomerate,
the next question is: where should we list it?
There are four different alternatives about where to list Alcon:
- The Swiss listing
- The dual listing
- The US listing
- The American Depository Receipt (ADR)
We do suggest to go for the US listing, here is why:

12. Listing Alcon, but where?
The Swiss listing
CONS
• Few institutional investors
• Low liquidity in the market
• Small size of the market
PROS
• Lower administration costs
• Lower information asymmetries
• Proximity between firms and old
investors

13. Listing Alcon, but where?
The dual listing
PROS - attraction of a large number of investors
- target of pharmaceutical investors
CONS - higher administrative costs
- low success rate (statistics)
- financing resource conflicts
The American Depository Receipt (ADR)
PROS - target of US specialty pharmaceutical funds
- lower administrative costs
CONS - higher commissions and inflexibility for investors
- loose of interest from investors due to the overspecialization of the funds
- time differences

14. Listing Alcon, but where?
The US listing
PROS - high levels of liquidity
- well developed regulation market
- attraction of a larger investors’ base
- easier comparison with competitors
- lower information assymetries
- largest number of expert pharmaceutical investors
- high visibiliy
CONS If you choose a SWISS BASED SUBSIDIARY COMPANY
-impossibililty of forecasting investors’ interest
-need of stuctural adjustments in order to adapt the company to the US
listing market.
If you choose an AMERICAN BASED SUBSIDIARY COMPANY
-inadaptability with tue US standards
-subjection to the US corporate income tax
-impossibility to claim

15. Listing Alcon, but where?
The US listing
BEST OPTION!!!
We do suggest to list Alcon in the US market, while maintaining a Swiss company
structure.
The gains will over come the cost of transformation: considering that Alcon’s
major part of revenues comes from the American market, it will be able to earn
even more if we consider the fiscal deductions and the lower control that the
company will face.

16. This is it!
That’s what we think about the carve out of Alcon
We told you why this is a good move, how it would increase your value, and
where you should do it…
Now it’s your time to go on with us.
We wish we will able to say:
“…well, we told you!”
Group 7