SAC Tries for Bull’s Eye

Chidem Kurdas

Steve Cohen’s Alcon trade has been fascinating. Alcon Inc. specializes in eye care products, primarily drugs and devices. It was the largest position held by Mr. Cohen’s SAC, with stock and options worth about $460 million as of April.

While acquiring other businesses in the same specialty, Alcon itself has been targeted for acquisition by Novartis, the Swiss pharmaceutical giant. Novartis will have majority control of the firm once it completes the purchase of shares held by Nestlé. There’s a fight going on about the price Novartis will pay the minority shareholders, among them the SAC hedge fund.

SAC is not known as an event-driven investor. But presumably the long-rumored and long-in-process Novartis takeover was a key factor in the decision to take the Alcon position. The big pharmaceutical company is offering $151 per share, which is less than it paid Nestlé. The price is expected to rise—the stock was fluctuating around $152 in the past few days.

A number of big hedge funds have significant holdings in pharmaceutical and other medical firms.  For instance, Renaissance Technologies  bought $530 million of Pfizer stock. With the biomedical industry undergoing consolidation, some of these trades look to be bets on M&A.

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