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Johnson & Johnson to Complete Synthes Acquisition

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Johnson & Johnson (NYSE: JNJ), a leading healthcare and pharmaceutical company, is expected to complete the acquisition of Swiss medical device company on Thursday.

The acquisition, expected to cost $19.7 billion, will be Johnson & Johnson's largest deal in history.

The purchase will be valuable for Johnson & Johnson, as it looks to make strides into the orthopedic surgery market. Synthes will certainly provide the means, as it makes a large amount of medical devices such as metal discs for spinal cords and plates used for fusing bones together.

However, in order to get the approval of the U.S. and European regulators, Johnson & Johnson agreed to lose its DuPuy Orthopaedics subsidiary to Biomet.

The conclusion of the deal will be a welcome piece of good news for Johnson & Johnson, as the company has suffered through one recall storm after another in recent years, each one a new public relations disaster that the company did not necessarily need. The Infant Tylenol recall, in particular, left a nasty stain on the company's reputation that will not disappear overnight. Still, the fact that Synthes does a lot of business in emerging markets like Russia, China and India will be important.

Investors certainly like the look of the deal, which should add 3-5 cents per year in 2012. Following the news, Johnson & Johnson shares moved up 1.7% to $64.13 in early morning trading.

The news will be a boost to Johnson & Johnson investors, who have seen the company's stock fall behind its rivals. While shares have gone up 14.4% since 2009, GlaxoSmithKline (NYSE: GSK) rose 34.5% and Merck (NYSE: MRK) rose 39.7%. The biggest mover was Pfizer (NYSE: PFE), which rose 46.2%.

Still, Johnson & Johnson is trading at 12.6 times trailing earnings compared to Pfizer, which trades at 9.6 times. Merck trades at 10.2 times.

As a result of the deal, Synthes shareholders will receive 1.717 shares in Johnson & Johnson, plus 55.65 Swiss Francs per share.

On Thursday, Johnson & Johnson is trading at about $64.50, up roughly 2%.

Follow me @BCallwood.

Posted-In: Biomet DuPuy Orthopaedics Swiss medical device company SynthesNews Topics M&A General Best of Benzinga

 

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