Johnson & Johnson Taps Its War Chest, Pays $21.3B For Synthes

Johnson & Johnson Taps Its War Chest, Pays $21.3B For Synthes

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Johnson & Johnsontapped its war chest andagreed to buy the Swiss-American orthopedic device maker Synthes for $21.3 billion in cash and stock.  The deal, which would merge Synthes with J&J’s DePuy Companies, would result in the company’s largest medical devices unit and would give J&J a large exposure to trauma, bone implants, and surgical tools.

In one of the biggest deals in healthcare ever, J&J would be paying 159 Swiss francs (CHF)  or approximately $181.30 per share, 55.65 CHF in cash (about $63.11) and 103.35 CHF (about $117.20) in J&J stock.  The deal, unanimously approved by both boards, represents a 22% premium over the 130.60 francs Synthes was trading at on April 14, before news of the deal surfaced.

Hansjorg Wyss, billionaire chairman and founder of Synthes, agreed to vote shares representing no less than 33% of Synthes common stock, according to the press release.  DealBook reports that Wyss controls 47% of the company, a stake worth slightly over $10 billion once the deal closes, making it practically impossible that shareholders looking for a higher price could block the deal.  Wyss said “I am very pleased and excited that my life’s work will continue as part of Johnson & Johnson.” Wyss ranks #155 in Forbes’ World’s Billionaires list, and is the second richest man in Switzerland, according to our records.

Bill Weldon, chairman and CEO of J&J, explained that the combined Synthes-DePuy operation would be a leading force in the field of orthopedics.  “Orthopedics is a large and growing $37 billion global market and represents an important growth driver for Johnson & Johnson. Synthes is widely respected for its innovative high-quality products, world-class R&D capabilities, its commitment to education, the highest standards of service, and extensive global footprint,” explained Weldon. (On other merger news, read Cephalon Rejects Valeant’s ‘Opportunistic’ Offer).

As any deal, the transaction is subject to clearance by regulators, in this case both in the U.S. and in Europe.  BY combining the second and third-largest spine-related implant operations in the world, DealBookspeculates regulators could require a divestment, despite citing an analyst who believes it could “go untouched.”  Goldman Sachs and Credit Suisseadvised J&J and Synthes, respectively.

Shares in J&J were trading down on the news in a day where all eyes are set on the Federal Reserve and Chairman Ben Bernanke, who will be hosting the first ever post-FOMC press conference.  J&J was down 0.5% or 30 cents to $64.65 by 11:25 AM in New York, while Synthes, which trades in the Swiss Stock Exchange, opened up substantially higher on the news, but worked its way down to end the European session flat on the day.

 

 

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