In our last post we discussed the ongoing lawsuit against Johnson & Johnson over an alleged kickback scheme involving some of its medications. Although the New Brunswick, New Jersey-based company is already setting aside funds to settle the litigation, being the world’s largest health care products company has its advantages; it still has a few dollars left over for the acquisition of Synthes Inc., a medical device manufacturer based in Switzerland that sells screws, plates, bone grafts and similar products.
The $19.7 billion purchase is estimated to be the largest in the company’s history and will raise its 2012 earnings by 3 to 5 cents per share. Johnson & Johnson has entered into buyback agreements for roughly $12.9 billion in shares with Goldman Sachs and JPMorgan Chase & Co. to help pay for the acquisition of cash and stock. The company is purchasing the shares through Janssen Pharmaceutical, its Ireland-based unit, allowing Johnson & Johnson to use its cash from outside the United States. It’s an efficient means of financing the transaction that will put the company and its shareholders in a more competitive position.
The acquisition could be a very good strategic move for the company, whose shares have lost 4.6 percent in the past year up until Tuesday. On Wednesday its shares rose 2.4 percent in New York Stock Exchange composite trading. In 2013, the first full year of joint operations with Synthes, the acquisition could add 10 to 15 cents per share to its earnings. It may not be a bad deal either for Synthes shareholders, who are to receive 55.65 Swiss francs and about 1.72 shares of Johnson & Johnson stock for each share they own based on Thursday’s closing.
Johnson & Johnson won the European Union’s approval for the purchase in April, having agreed to sell one of its other businesses, DePuy Orthopaedics Trauma, to avoid antitrust issues. It announced earlier this week that it had won U.S. approval from the Federal Trade Commission.
The goals of a corporation as massive as Johnson & Johnson may not be derailed by expensive commercial litigation, but smaller companies wishing to grow through a merger or acquisition can usually benefit from the guidance of a business attorney to weigh their options for development.
Source: NJ.com, “J&J’s $19.7 billion purchase of Synthes gets U.S. approval,” June 13, 2012