Essay About Investors’ Announcementsfew And Scarcity Of Liquiditylow Administrative Costs

Nestle and Alcon
Nestle and Alcon – The value of a ListingThe 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 ListingProsConsSimple to implement, no legal adjustmentsSwiss market Size – poor visibility and scarcity of liquidityLow Administrative Costs – same reporting schedules and investors’ announcementsFew large Institutional Investors expert in OphthalmologyMore than half operations and sales are in the USUS ListingProsConsAttract US Investors – Liquidity availabilityNo more royalty deductionsCloser to headquarters, R&D Centre and primary marketHigh costs of reorganizationHigher visibilityDuplication of administrative costsDual ListingProsConsAchieve investors of both Swiss and US thus provides the biggest market among the four listing methodsExpensive procedure – It includes Issuing costs and different Accounting SystemsBe able to target the specialty pharmaceutical investorsInconsistent Security LawsFlashback EffectADRProsConsBe familiar with most US institutional investors, thus helps in targeting sizable American Market.Attract international diversified funds instead of the specialty pharmaceutical investorsLess requirement than direct issuing.Be recognized as a foreign companyEasy to trade for investorsNot a good choice for trade in secondary market as there will be high time lag and higher commission.Key Questions to be addressedHow to arrive at an appropriate valuation of Alcon?How will carving out impact the valuation of Nestle, the company?Are the reasons of spinning off justified? On what stock exchange should Nestle list Alcon?