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J&J seals huge deal to buy Synthes
By Katie Reid |
April 28, 2011, Thursday
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JOHNSON & Johnson is to buy Swiss medical devices maker Synthes Inc for 19 billion Swiss francs (US$21.59 billion) in its largest ever buy, boosting its orthopedic business and reshaping the wider industry.
The United States healthcare group will pay 159 Swiss francs in cash and stock for each Synthes share, the two companies said yesterday. That is a premium of 8.5 percent over Synthes's closing share price on Tuesday.
A deal had been anticipated after Synthes said on April 18 it was in talks with J&J.
The acquisition, which is expected to close in the first half of 2012, has the backing of both the Synthes and J&J boards and will give J&J a leading position in equipment to treat trauma.
Synthes, which posted sales of US$3.7 billion in 2010, makes nails, screws and plates to fix broken bones, as well as artificial spine discs.
"Orthopedics is a large and growing US$37 billion global market and represents an important growth driver for Johnson & Johnson," said Bill Weldon, J&J's chairman and chief executive.
The deal is expected to have a modestly dilutive impact on J&J's adjusted earnings per share for 2012.
Crucially, the deal has the backing of Hansjoerg Wyss, who holds 40 percent of Synthes directly and another 8 percent through family trusts, and was seen as key to any deal going through.
"It is surprising the deal has been struck between cash and shares. The market consensus, and our view, was it would be all cash, so the quality of the takeout is slightly lower than we anticipated," said Morgan Stanley analyst Michael Jungling. "The takeout valuation doesn't seem particularly demanding. It's a scarce asset, and the acquisition makes J&J the No. 1 in the world in orthopedics."
Jefferies analyst Ingeborg Oie said the acquisition appeared to be in line with previous deals given that Synthes has historically commanded a premium of about 10 percent in the sector.
Synthes and J&J also said the transaction had an estimated net acquisition cost of US$19.3 billion as of the close of business on April 26 based on Synthes' approximately 119.5 million fully diluted shares outstanding and approximately US$2 billion in cash on hand as of signing.
The medical device sector has been consolidating as companies seek economies of scale and new business areas, but analysts doubt anyone will want to take on J&J with a counter-bid for Synthes.
Medical devices and diagnostics accounted for 40 percent of J&J's US$61.6 billion in 2010 sales, but the business has been hit by competition and recalls in its hip and knee replacement unit.
J&J owns around 250 separate companies under its corporate umbrella.
The United States healthcare group will pay 159 Swiss francs in cash and stock for each Synthes share, the two companies said yesterday. That is a premium of 8.5 percent over Synthes's closing share price on Tuesday.
A deal had been anticipated after Synthes said on April 18 it was in talks with J&J.
The acquisition, which is expected to close in the first half of 2012, has the backing of both the Synthes and J&J boards and will give J&J a leading position in equipment to treat trauma.
Synthes, which posted sales of US$3.7 billion in 2010, makes nails, screws and plates to fix broken bones, as well as artificial spine discs.
"Orthopedics is a large and growing US$37 billion global market and represents an important growth driver for Johnson & Johnson," said Bill Weldon, J&J's chairman and chief executive.
The deal is expected to have a modestly dilutive impact on J&J's adjusted earnings per share for 2012.
Crucially, the deal has the backing of Hansjoerg Wyss, who holds 40 percent of Synthes directly and another 8 percent through family trusts, and was seen as key to any deal going through.
"It is surprising the deal has been struck between cash and shares. The market consensus, and our view, was it would be all cash, so the quality of the takeout is slightly lower than we anticipated," said Morgan Stanley analyst Michael Jungling. "The takeout valuation doesn't seem particularly demanding. It's a scarce asset, and the acquisition makes J&J the No. 1 in the world in orthopedics."
Jefferies analyst Ingeborg Oie said the acquisition appeared to be in line with previous deals given that Synthes has historically commanded a premium of about 10 percent in the sector.
Synthes and J&J also said the transaction had an estimated net acquisition cost of US$19.3 billion as of the close of business on April 26 based on Synthes' approximately 119.5 million fully diluted shares outstanding and approximately US$2 billion in cash on hand as of signing.
The medical device sector has been consolidating as companies seek economies of scale and new business areas, but analysts doubt anyone will want to take on J&J with a counter-bid for Synthes.
Medical devices and diagnostics accounted for 40 percent of J&J's US$61.6 billion in 2010 sales, but the business has been hit by competition and recalls in its hip and knee replacement unit.
J&J owns around 250 separate companies under its corporate umbrella.
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