Global Biz

J&J to buy Synthes for $21.6b

(Agencies)
Updated: 2011-04-27 16:10

ZURICH - Johnson & Johnson is to buy Swiss medical devices maker Synthes Inc for 19 billion Swiss francs ($21.59 billion) in its largest ever buy, boosting its orthopedic business and reshaping the wider industry.

The US healthcare group will pay 159 Swiss francs in cash and stock for each Synthes share, the two companies said on Wednesday. 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 $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 $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 take-out is slightly lower than we anticipated," said Morgan Stanley analyst Michael Jungling.

"The take-out valuation doesn't seem particularly demanding. It's a scarce asset, and the acquisition makes J&J the number one in the world in orthopedics," Jungling said.

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 shares were trading 2 percent firmer at 0723 GMT at 149.40 francs, outperforming a near flat European healthcare index.